SECURITIES AND EXCHANGE COMMISSION
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| ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended DecemberDecember. 31, 20192022 |
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| o | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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o | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 1-14542
ASIA PACIFIC WIRE & CABLE
(Exact name of Registrant as specified in its charter)
(Jurisdiction of incorporation or organization)
(Address of principal executive offices)
Email: ivan.hsia@apwcc.com (Name, telephone, e-mail and/or
facsmilefacsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
| | | | | | | | |
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| | |
Common Shares,
par value 0.01 per share | APWC | NASDAQ Global Capital Market |
Securities registered or to be registered pursuant to Section 12(g) of the Act.
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.
13,819,669
20,616,227 Common Shares
outstanding as of December 31, 2022
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated Filer o Accelerated filer o Non-accelerated filer x Emerging growth company o
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o Indicate by check mark whether the registrant ishas filed a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,”report on and “emerging growth company” in Rule 12b-2attestation to its management’s assessment of the Exchange Act. Large accelerated Filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Emerging growth company ☐effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
o Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐o
International Financial Reporting Standards as issued by the International Accounting Standards Board ☒x
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes ☐.
Table of Contents
CERTAIN DEFINITIONS AND CONVENTIONS
Unless the context otherwise indicates or requires, all references to:
•the terms “we,” “us,” “our,” and “APWC” refer to Asia Pacific Wire & Cable Corporation Limited, a holding company incorporated in Bermuda with principal executive offices in Taipei, Taiwan.
•the terms “our Company,” “our business” and “our operations” refer to APWC together with our operating subsidiaries.
•Dollar amounts in this Annual Report are expressed in thousands ($000), except where otherwise indicated (e.g. “million”) or with respect to earnings per share.
•the terms “dollar”, “US$” or “$” refer to U.S. dollars, the lawful currency of the United States of America.
• “Bt,” “Thai Baht”, “THB” or “Baht” refer to Baht, the legal tender currency of Thailand.
• “Sing$” or “S$” refer to Singapore dollars, the legal tender currency of Singapore.
• “A$” or “AU$” refer to Australian dollars, the legal tender currency of Australia.
•“RMB” refer to Chinese Renminbi, the legal tender currency of China
•“Thailand” refers to the Kingdom of Thailand.
•“Singapore” refers to The Republic of Singapore.
•“Taiwan” refers to Taiwan, The Republic of China.
•“China” or “PRC” refer to The People’s Republic of China (for the purpose of this Annual Report, excluding Hong Kong and Macau).
•“Australia” refers to the Commonwealth of Australia.
•“United States” or “U.S.” refer to the United States of America.
Most measurements in this Annual Report are given according to the metric system. Standard abbreviations of metric units (e.g., “mm” for millimeter) have been employed without definitions. All references in this Annual Report to “tons” are to metric tons, which are equivalent in weight to 2,204.6 pounds or 1,000 kilograms.
All references to “outstanding” in respect of APWC’s Common Shares shall mean that such Common Shares have been issued by APWC and are not registered in APWC’s register of members as treasury shares.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
Annual Reportannual report on Form 20-F
("Annual Report") contains forward-looking statements within the meaning of the safe harbor provisions of the
U,.S.U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements give our current beliefs or expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “estimate,” “expect,” “intend,” “plan,” “believe”, “may”, “should”, “likely”, “seeks” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance.
Such statements are not promises or guarantees and are subject to a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include our ability to maintain and develop market share for our products; global, regional or national economicthe impact of the COVID-19 pandemic on our business, operations, demands for our products, results, financial position and financial conditions,liquidity; the global dropextreme volatility in the demand for and the pricing of commodities, including copper, our principal raw material, and
their individual or collective impact on demand for our products and services; the introduction of competing products or technologies; the volatility of share prices on major securities exchanges throughout the world, our inability to successfully identify, consummate and integrate acquisitions; our potential exposure to liability claims; the uncertainty and volatility of the markets in which we operate; changes in laws or regulations applicable to theour Company in the markets in which we conduct business; the availability and price of copper, our principal raw material;material, including the effects of recent and potential economic sanctions on Russia; our ability to negotiate extensions of labor agreements on acceptable terms and to successfully deal with any labor disputes; our ability to service and meet all requirements under our debt, and to maintain adequate credit facilities and credit lines; in certain markets, our ability to compete effectively with state-owned enterprises (“SOEs”), which may receive governmental subsidies to enhance results or receive preferred vendor status in state controlled projects; our ability to make payments of interest and principal under our existing and future indebtedness; our ability to increase manufacturing capacity and productivity; the fact that we have operations outside the United States that may be materially and adversely affected by acts of terrorism, war and political and social unrest, or major hostilities; exposure to political and economic developments,developments; COVID-19 and government implemented lockdowns, circuit breakers, and other mandates that may adversely affect our business and operations; crises, instability, terrorism, civil strife, expropriation and other risks of doing business in foreign markets; economic consequences arising from natural disasters and other similar catastrophes, such as floods, earthquakes, hurricanes and tsunamis; the fact that Asia Pacific Wire & Cable Corporation Limited (“APWC” or the “Company”)APWC is a holding company that depends for income upon distributions from operating subsidiaries, most of which are not wholly-owned and for which there may be restrictions on the timing and amount of distributions; price competition and other competitive pressures; the impact of climate change on our business and operations and on our customers; tax inefficiencies associated with our cross-border operations, including without limitation, limitations on our ability to utilize net losses within our group of companies for income tax purposes; fluctuations in currency, exchange and interest rates, operating results and the impact of technological changes and other factors that are discussed in this report and in our other filings made with the Securities and Exchange Commission (the “SEC” or). Statements about the “Commission”).effects of the COVID-19 pandemic on our business results, financial position and liquidity are subject to the risk that the actual impact may differ, possibly materially, from what is currently expected.
In particular, these statements include, among other things, statements relating to:
•our prospects for future revenues and profits in the markets in which we operate;
•the impact of political, legal or regulatory changes or developments in the markets in which we do business;
•our dependence upon the level of business activity and investment by our customers for the generation of our sales revenue;
•our reliance on our majority shareholder for research and development relating to our product lines
lines; the fact that ourAPWC’s common shares (the “Common Shares”) are traded on a national exchange in the United States and the relative liquidity or lack thereof, based upon the historical trading volume of our publicly-traded Common Shares;
•our dependence on a limited number of suppliers for our raw materials and our vulnerability to fluctuations in the cost and availability of oursuch raw materials; and
•the liquidity (or lack thereof) generally of our property and assets.
We undertake no obligation to update any forward-looking statements or other information contained in this Annual Report, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any additional disclosures we make in our filings with the SEC. Also note that we provide a cautionary discussion of risks and uncertainties under the “Risk Factors” section of this Annual Report. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed there could also adversely affect us.
CERTAIN DEFINITIONSPart I
ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND
CONVENTIONSUnless otherwise specified, all references in this Annual Report to “Thailand” are to the Kingdom of Thailand, all references to “Singapore” are to The Republic of Singapore, all references to “Taiwan” are to Taiwan, The Republic of China, all references to “China” or to the “PRC” are to The People’s Republic of China (for the purpose of this Annual Report, excluding Hong Kong and Macau), all references to “Australia” are to the Commonwealth of Australia and all references to the “United States” or “U.S.” are to the United States of America.
Most measurements in this Annual Report are given according to the metric system. Standard abbreviations of metric units (e.g., “mm” for millimeter) have been employed without definitions. All references in this Annual Report to “tons” are to metric tons, which are equivalent in weight to 2,204.6 pounds.
With respect to measurements relating to the manufacture of wire and cable products, references to “pkm” are to kilometers of twisted pairs of copper wires.
Dollar amounts in this Annual Report are expressed in thousands ($000), except where otherwise indicated or with respect to earnings per share.
Unless otherwise specified, all references in this Annual Report to “$,” “U.S. dollars”, “USD” or “US$” are to United States dollars, the legal tender currency of the United States; all references to “Bt,” “Thai Baht” or “Baht” are to Baht, the legal tender currency of Thailand; all references to “Sing$” or “S$” are to Singapore dollars, the legal tender currency of Singapore; all references to “A$” or “AU$” are to Australian dollars, the legal tender currency of Australia; and all references to “RMB” are to Chinese Renminbi, the legal tender currency of China.
Part I
ADVISERS Item 1:
| Identity of Directors, Senior Management and Advisers
|
Not applicable
ITEM 2:
| OFFER STATISTICS AND EXPECTED TIMETABLE
|
ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable
| A.
| Selected Consolidated Financial Data
|
ITEM 3: KEY INFORMATION
3.A. Selected Consolidated Financial Data
The following selected consolidated financial data is derived from the consolidated financial statements of theour Company for the years ended December 31, 2022, 2021, 2020, 2019 2018, 2017, 2016 and 2015,2018, prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The selected data set forth below should be read in conjunction with, and is qualified in its entirety by, the discussion in “Item
5:5. Operating and Financial Review and Prospects” and the consolidated financial statements and the notes thereto referenced in “Item
18:18. Financial Statements.”
| For the Year Ended December 31, | |
| 2019 (3) | | 2018 (2) | | 2017 | | 2016 | | 2015 | |
| (in US$ thousands) | |
Income Statement Data: | | | | | | | | | | | | | | | |
Revenue | $ | 338,160 | | $ | 425,940 | | $ | 425,215 | | $ | 384,565 | | $ | 389,632 | |
Costs of sales | | (313,373 | ) | | (389,692 | ) | | (385,527 | ) | | (352,957 | ) | | (366,143 | ) |
Gross profit | | 24,787 | | | 36,248 | | | 39,688 | | | 31,608 | | | 23,489 | |
Other operating income | | 385 | | | 805 | | | 5,084 | | | 5,441 | | | 1,140 | |
Selling, general & administrative expenses | | (25,051 | ) | | (26,924 | ) | | (27,248 | ) | | (26,325 | ) | | (27,007 | ) |
Other operating expenses | | (770 | ) | | (1,445 | ) | | (909 | ) | | (3,386 | ) | | (332 | ) |
Operating profit/(loss) | | (649 | ) | | 8,684 | | | 16,615 | | | 7,338 | | | (2,710 | ) |
Finance costs | | (1,012 | ) | | (1,378 | ) | | (1,221 | ) | | (1,147 | ) | | (1,547 | ) |
Finance income | | 506 | | | 482 | | | 876 | | | 1,045 | | | 697 | |
Share of loss of associates | | (3 | ) | | (3 | ) | | (3 | ) | | (710 | ) | | (801 | ) |
Impairment of investment in associates | | — | | | — | | | — | | | (126 | ) | | — | |
Loss on liquidation of a subsidiary | | — | | | — | | | (261 | ) | | — | | | — | |
Exchange gain/(loss) | | 1,550 | | | 1,741 | | | 2,784 | | | (38 | ) | | (4,223 | ) |
Other income | | 717 | | | 1,817 | | | 214 | | | 267 | | | 119 | |
Other expense | | (3 | ) | | (11 | ) | | (336 | ) | | (94 | ) | | (180 | ) |
Profit/(loss) before taxes | | 1,106 | | | 11,332 | | | 18,668 | | | 6,535 | | | (8,645 | ) |
Income taxes expense | | (2,057 | ) | | (3,886 | ) | | (5,140 | ) | | (510 | ) | | (466 | ) |
Profit/(loss) for the year | $ | (951 | ) | $ | 7,446 | | $ | 13,528 | | $ | 6,025 | | $ | (9,111 | ) |
Attributable to: | | | | | | | | | | | | | | | |
Equity holders of the parent | $ | (1,632 | ) | $ | 2,928 | | $ | 8,720 | | $ | 2,853 | | $ | (7,694 | ) |
Non-controlling interests | $ | 681 | | $ | 4,518 | | $ | 4,808 | | $ | 3,172 | | $ | (1,417 | ) |
Earnings per share (1) | | | | | | | | | | | | | | | |
Basic and diluted (loss)/profit for the year attributable to equity holders of the parent | $ | (0.12 | ) | $ | 0.21 | | $ | 0.63 | | $ | 0.21 | | $ | (0.56 | ) |
7
| As of December 31, | |
| 2019 (3) | | 2018 (2) | | 2017 | | 2016 | | 2015 | |
| (in US$ thousands) | |
Balance Sheet Data: | | | | | | | | | | | | | | | |
Cash and cash equivalents | $ | 53,673 | | $ | 60,778 | | $ | 46,093 | | $ | 48,231 | | $ | 51,303 | |
Working capital | | 185,855 | | | 182,410 | | | 181,752 | | | 157,012 | | | 144,306 | |
Total assets | | 298,911 | | | 305,798 | | | 334,843 | | | 293,596 | | | 305,256 | |
Total debts | | 11,356 | | | 24,814 | | | 42,688 | | | 29,762 | | | 39,238 | |
Net assets | | 228,435 | | | 221,816 | | | 222,826 | | | 197,175 | | | 193,275 | |
Capital stock | | 138 | | | 138 | | | 138 | | | 138 | | | 138 | |
Total APWC shareholders’ equity | | 153,854 | | | 150,028 | | | 153,328 | | | 135,950 | | | 134,309 | |
(1)
| The calculation of the earnings per share is based on 13,819,669 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the Year Ended December 31, | | 2022 | | 2021 | | 2020 | | 2019 (3) | | 2018(2) | | (in US$ thousands, except for earnings per share) | | Income Statement Data: | | | | | | | | | | | Revenue | $ | 433,893 | | | $ | 476,659 | | | $ | 313,564 | | | $ | 338,160 | | | $ | 425,940 | | | Costs of sales | (401,363) | | | (455,508) | | | (279,686) | | | (313,373) | | | (389,692) | | | Gross profit | 32,530 | | | 21,151 | | | 33,878 | | | 24,787 | | | 36,248 | | | Other operating income | 1,027 | | | 587 | | | 814 | | | 385 | | | 805 | | | Selling, general & administrative expenses | (24,978) | | | (26,484) | | | (27,006) | | | (25,051) | | | (26,924) | | | Other operating expenses | (512) | | | (227) | | | (129) | | | (770) | | | (1,445) | | | Operating profit/(loss) | 8,067 | | | (4,973) | | | 7,557 | | | (649) | | | 8,684 | | | Finance costs | (1,650) | | | (1,251) | | | (744) | | | (1,012) | | | (1,378) | | | Finance income | 120 | | | 123 | | | 320 | | | 506 | | | 482 | | | Share of loss of associates | (1) | | | (1) | | | (1) | | | (3) | | | (3) | | | Exchange gain/(loss) | 143 | | | (4,425) | | | (579) | | | 1,550 | | | 1,741 | | | Other income | 889 | | | 671 | | | 1,173 | | | 717 | | | 1,817 | | | Other expense | (3) | | | (1) | | | (1) | | | (3) | | | (11) | | | Profit before taxes | 7,565 | | | (9,857) | | | 7,725 | | | 1,106 | | | 11,332 | | | Income taxes expense | (2,808) | | | 1,345 | | | (4,016) | | | (2,057) | | | (3,886) | | | Profit/(loss) for the year | $ | 4,757 | | | $ | (8,512) | | | $ | 3,709 | | | $ | (951) | | | $ | 7,446 | | | Attributable to: | | | | | | | | | | | Equity holders of APWC | $ | 3,874 | | | $ | (2,642) | | | $ | (552) | | | $ | (1,632) | | | $ | 2,928 | | | Non-controlling interests | $ | 883 | | | $ | (5,870) | | | $ | 4,261 | | | $ | 681 | | | $ | 4,518 | | | Earnings per share (1) | | | | | | | | | | | Basic and diluted profit/(loss) for the year attributable to equity holders of the parent | $ | 0.19 | | | $ | (0.19) | | | $ | (0.04) | | | $ | (0.12) | | | $ | 0.21 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of December 31, | | 2022 | | 2021 | | 2020 | | 2019 (3) | | 2018(2) | | (in US$ thousands) | | Balance Sheet Data: | | | | | | | | | | | Cash and cash equivalents | $ | 54,017 | | | $ | 44,507 | | | $ | 52,237 | | | $ | 53,673 | | | $ | 60,778 | | | Working capital | $ | 165,926 | | | 149,810 | | | 180,323 | | | 185,855 | | | 182,410 | | | Total assets | $ | 371,019 | | | 389,428 | | | 338,119 | | | 298,911 | | | 305,798 | | | Total debts | $ | 57,731 | | | 65,387 | | | 13,781 | | | 11,356 | | | 24,814 | | | Net assets | $ | 211,428 | | | 209,317 | | | 234,875 | | | 228,435 | | | 221,816 | | | Capital stock | $ | 206 | | | 138 | | | 138 | | | 138 | | | 138 | | | Total APWC shareholders’ equity | $ | 151,595 | | | 147,500 | | | 157,860 | | | 153,854 | | | 150,028 | |
(1)The calculation of the earnings per share is based on 20,020,364 basic and diluted weighted Common Shares issued and outstanding for each of the years ended December 31, 2019, 2018, 2017, 2016 and 2015. |
(2)
| Includes the impact of the application of IFRS 9 and IFRS 15, as explained n Note 4.1(b) of our consolidated financial statement presented herewith.
|
(3)
| Includes the impact of the application of IFRS 16, as explained in Note 4.1(a) of our consolidated financial statements presented herewith.
|
Exchange Rate Information
Unless otherwise noted, for the convenienceyear ended December 31, 2022; and was based on 13,819,669 basic and diluted Weighted Common Shares issued and outstanding for each of the reader, translations of amounts from Baht, Singapore dollars, Renminbi and Australian dollars to U.S. dollars have been made at the respective noon buying rates in New York City for cable transfers in those currencies as certified for customs purposes by the Federal Reserve Bank of New York (the “Noon Buying Rate”) onyear ended December 31, 2019. The respective Noon Buying Rates on December 31,2021, 2020, 2019, were US$ 1.00 = Bt 29.75; S$ 1.345; RMB 6.962; and A$ 1.423. The respective Noon Buying Rates on March 31, 2020,2018.
(2)Includes the latest practicable date before publication of this Annual Report, were US$ 1.00 = Bt 32.70; S$ 1.422; RMB 7.081 and A$ 1.629. No representation is made that the foreign currency amounts could have been or could be converted into U.S. dollars on these dates at these rates or at any other rates.Sources: Federal Reserve Bulletin, Board of Governorsimpact of the Federal Reserve System. Federal Reserve Statistical Release H.10, fromapplication of IFRS 9 and IFRS 15.
(3)Includes the websiteimpact of the Boardapplication of Governors of the Federal Reserve System at http://www.federalreserve.gov.Thailand
The Thai Baht is convertible into foreign currenciesIFRS 16.
3.B. Capitalization and is subject to a managed float against a basket of foreign currencies, the most significant of which is the U.S. dollar. The composition of the basket for determining the value of the Baht is not made public by the Bank of Thailand. The following tables set forth,Indebtedness
Not applicable
3.C. Reasons for the
periods indicated, certain information concerning the Noon Buying RateOffer and Use of
the Thai Baht. No representation is made that the Baht or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Baht, as the case may be, at any particular rate or at all.Year Ended December 31, | At Period End | | Average(1) | | High | | Low | |
| (Bt per $1.00) | |
2015 | | 36.08 | | | 34.39 | | | 36.48 | | | 32.32 | |
2016 | | 35.81 | | | 35.22 | | | 36.33 | | | 34.54 | |
2017 | | 32.56 | | | 33.75 | | | 35.89 | | | 32.49 | |
2018 | | 32.31 | | | 32.27 | | | 33.44 | | | 31.11 | |
2019 | | 29.75 | | | 30.89 | | | 32.26 | | | 29.75 | |
(1)
| Average means the average of the Noon Buying Rates on the last day of each month during a year.
|
8
The high and low exchange rates for the six months preceding the date of this Annual Report were:
Month | High | | Low | |
October 2019 | | 30.61 | | | 30.16 | |
November 2019 | | 30.43 | | | 30.17 | |
December 2019 | | 30.36 | | | 29.75 | |
January 2020 | | 31.19 | | | 30.15 | |
February 2020 | | 31.83 | | | 30.97 | |
March 2020 | | 32.86 | | | 31.34 | |
Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.
Singapore
The Singapore dollar is convertible into foreign currencies and floats against a trade-weighted basket of foreign currencies, the composition of which is not made public by Singapore’s central bank, the Monetary Authority of Singapore, but of which the U.S. dollar is a component. The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Singapore dollar. No representation is made that the Singapore dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Singapore dollars, as the case may be, at any particular rate or at all.
Year Ended December 31, | At Period End | | Average(1) | | High | | Low | |
| (S$ per $1.00) | |
2015 | | 1.417 | | | 1.378 | | | 1.434 | | | 1.317 | |
2016 | | 1.447 | | | 1.382 | | | 1.452 | | | 1.337 | |
2017 | | 1.336 | | | 1.373 | | | 1.450 | | | 1.336 | |
2018 | | 1.362 | | | 1.350 | | | 1.384 | | | 1.304 | |
2019 | | 1.345 | | | 1.363 | | | 1.391 | | | 1.345 | |
(1)
| Average means the average of the Noon Buying Rates on the last day of each month during a year.
|
The high and low exchange rates for the six months preceding the date of this Annual Report were:
Month | High | | Low | |
October 2019 | | 1.385 | | | 1.361 | |
November 2019 | | 1.367 | | | 1.357 | |
December 2019 | | 1.366 | | | 1.345 | |
January 2020 | | 1.365 | | | 1.346 | |
February 2020 | | 1.401 | | | 1.369 | |
March 2020 | | 1.461 | | | 1.379 | |
Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.
9
China
The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign currencies, including the conversion rate limitations on capital transfers and through restrictions on foreign trade and other regulatory impediments to the free transferability of capital. The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Renminbi. No representation is made that the Renminbi or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate or at all.
Year Ended December 31, | At Period End | | Average(1) | | High | | Low | |
| (RMB per $1.00) | |
2015 | | 6.478 | | | 6.287 | | | 6.490 | | | 6.187 | |
2016 | | 6.943 | | | 6.655 | | | 6.958 | | | 6.448 | |
2017 | | 6.506 | | | 6.735 | | | 6.958 | | | 6.477 | |
2018 | | 6.876 | | | 6.629 | | | 6.974 | | | 6.265 | |
2019 | | 6.962 | | | 6.901 | | | 7.179 | | | 6.682 | |
(1)
| Average means the average of the Noon Buying Rates on the last day of each month during a year.
|
The high and low exchange rates for the six months preceding the date of this Annual Report were:
Month | High | | Low | |
October 2019 | | 7.147 | | | 7.038 | |
November 2019 | | 7.039 | | | 6.977 | |
December 2019 | | 7.061 | | | 6.962 | |
January 2020 | | 6.975 | | | 6.859 | |
February 2020 | | 7.029 | | | 6.965 | |
March 2020 | | 7.110 | | | 6.924 | |
Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.
Australia
The following tables set forth, for the periods indicated, certain information concerning the Noon Buying Rate of the Australian dollar. No representation is made that the Australian dollar or U.S. dollar amounts referred to herein could have been or could be converted into U.S. dollars or Australian dollars, as the case may be, at any particular rate or at all.
Year Ended December 31, | At Period End | | Average(1) | | High | | Low | |
| (A$ per $1.00) | |
2015 | | 1.372 | | | 1.342 | | | 1.446 | | | 1.218 | |
2016 | | 1.383 | | | 1.346 | | | 1.459 | | | 1.279 | |
2017 | | 1.280 | | | 1.301 | | | 1.383 | | | 1.239 | |
2018 | | 1.419 | | | 1.344 | | | 1.425 | | | 1.234 | |
2019 | | 1.423 | | | 1.438 | | | 1.493 | | | 1.373 | |
(1)
| Average means the average of the Noon Buying Rates on the last day of each month during a year.
|
10
The high and low exchange rates for the six months preceding the date of this Annual Report were:
Month | High | | Low | |
October 2019 | | 1.493 | | | 1.452 | |
November 2019 | | 1.479 | | | 1.446 | |
December 2019 | | 1.468 | | | 1.423 | |
January 2020 | | 1.493 | | | 1.432 | |
February 2020 | | 1.540 | | | 1.482 | |
March 2020 | | 1.738 | | | 1.503 | |
Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.
| B.
| CAPITALIZATION AND INDEBTEDNESS
|
Not applicable
| C.
| REASONS FOR THE OFFER AND USE OF PROCEEDS
|
Not applicable.
3.D. Risk Factors
You should carefully consider the following risksrisk factors set forth below in connection with any investment in the Company,APWC, including any investment in ourthe Common Shares. If any one of these risks or uncertainties occurs, our business, financial condition and results of operations could be materially and adversely affected. The risks and uncertainties described in this Annual Report on Form 20-F are not the only ones facing us. Additional risks and uncertainties that currently are not presently known to us or that we currently believe aredeem immaterial may also impair our business operations. Any of these risks could materially and adversely affect our business, financial condition, results of operations and cash flows, and could result in a loss of all or part of your investment.
Summary of Risk Factors
The following is a summary of the principal risks we face, organized under relevant headings. The list below is not exhaustive, and you should read the “Risk Factors” section in full.
Risks Related to Our Business (for more detailed discussion, see “Risk Factors -- Risks Related to Our Business”)
•COVID-19 could have a material also may adversely affectadverse effect on our business, financial condition and, results of operations. •Significant volatility in copper prices could be detrimental to our Company’s profitability.
•The markets in which we operate are highly competitive and may be affected by competition with SOEs and we cannot guarantee we will have the available capital to make necessary capital expenditures.
•We operate in highly concentrated end markets, and the loss of individual customers in such markets could have a material adverse impact on our position in that market as a whole.
•Our business could be harmed if we fail to attract and retain qualified personnel.
•We are subject to certain environmental protection laws and regulations governing our operations.
•Information systems failure or cybersecurity breaches could have a material adverse effect on our Company, including on our business, financial condition, and results of operations.
Risks Related to our Financial Activities (for more detailed discussion, see “Risk Factors -- Risks Related to our Financial Activities”)
•Restrictive covenants and default provisions in our existing debt agreements may materially restrict our operations as well as adversely affect our liquidity, business, financial condition and results of operations.
•We are exposed to foreign exchange rate risk.
Risk Related to the Regions in Which We Operate (for more detailed discussion, see “Risk Factors -- Risks Related to the Regions in Which We Operate”)
•The performance of our Company’s Thai operations is affected by the political and economic situation in Thailand.
•Our auditor’s China affiliate, like other independent registered public accounting firms operating in China, was not subject to inspection by the Public Company Accounting Oversight Board (the “PCAOB”), and if the PCAOB determines that it is unable to inspect or investigate completely because of a position taken by the PRC government, trading in our securities could be prohibited in the U.S. and our securities could be delisted.
•The PRC legal system may limit our Company’s remedies, impacting our subsidiaries’ ability to enforce agreements in the PRC with third parties.
•The enforcement of laws, rules and regulations in the PRC can change quickly with little advance notice. Uncertainties exist with respect to the interpretation and implementation of the PRC laws regarding foreign investment, cybersecurity, personal data protection and anti-monopoly, and any change in government interpretation or enforcement could implicate our PRC subsidiaries and have a material adverse effect on us.
•PRC regulation of loans to and direct investment in PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our PRC subsidiaries.
•The PRC government’s control of currency conversion and expatriation of funds may affect our liquidity.
•Political or social instability, including tensions between PRC and Taiwan, may materially adversely affect our Company’s business, financial condition, and results of operations.
Risks Related to the Common Shares and
APWC (for more detailed discussion, see “Risk Factors -- Risks Related to the
CompanyOurCommon Shares and APWC”)
•The Common Shares may be delisted from Nasdaq, which could affect their market price and liquidity.
•As a foreign private issuer, there is less publicly available information concerning our Company than there would be if APWC was a U.S. public company.
•Our Common Shares have a limited public float and are subject to price volatility, which could adversely affect our prevailing market price.
•APWC may not be able to resume paying a dividend and any dividends paid in the future could be reduced or eliminated, which could adversely affect our prevailing market price.
•Our holding company structure and potential restrictions on the payment of dividends could materially adversely affect our market price.
•APWC is incorporated in Bermuda, and investors may face limited recourse and enforceability against APWC as well as its directors and officers as compared to corporations incorporated in the U.S.
Control of APWC rests with its majority shareholder, PEWC, and APWC relies on Nasdaq’s controlled company and foreign private issuer exemptions, all of which could materially and adversely affect our corporate governance.
Risks Related to Our Business
COVID-19 could have a material adverse effect on our business, financial condition and, results of operations.
The global spread of the Coronavirus Disease 2019 (“COVID-19”), including more recently the highly transmissible Delta and Omicron variants thereof, has been impacting worldwide economic activity and financial markets. We are facing significant adverse effects related to the spread of COVID-19, and the recent developments surrounding the global pandemic have had, and are expected to continue to have, significant adverse effects on our business, financial condition, results of operations, and cash flows. As a result, COVID-19 could have a material and adverse effect on our business, financial condition, and results of operations.
Our operation and production have been affected and disrupted by the outbreak of COVID-19. From April 7, 2020 to June 1, 2020, our Singapore operating units operated with reduced on site staff and approximately half of the employees worked from home due to a partial lockdown implemented by the Singapore government. In the first half of 2020, our China production facilities had been operating below normal production levels due to the mandatory measures instituted in response to COVID-19. Starting from the third quarter of 2020 we were able to resume manufacturing activities in China and Singapore. However, our operating units were subject to temporary operation adjustments in 2020 and 2021 pursuant to local emergency regulations, with an adverse impact on our results of operations. While the overall COVID-19 situation appears to have improved in countries that have rolled out vaccination campaigns, our business and operating results may be negatively impacted if the virus worsens or mutates, if vaccination efforts are unsuccessful, or if further restrictions are implemented to contain the coronavirus. In connection with COVID-19, we may experience a new shutdown or slowdown of part or all of our manufacturing facilities.
COVID-19 has affected and disrupted our operations and the operations of our suppliers, customers, and other business partners, including as a result of travel restrictions, business shutdowns, and other COVID-19 containment measures. A slowdown in economic activity as a result of COVID-19 has also resulted in, and could continue to result in, a reduction in demand for our products. In addition, COVID-19 has delayed the fulfillment of contracts with our customers, causing negative impacts on our liquidity and ability to generate cash flows. If we are not able to expand or extend lines of credit from banks, we may negotiate business terms with our suppliers to meet our liquidity needs, which could cause an increase in financing costs.
We are facing increased operational challenges as we take measures to support and protect employee health and safety as a result of COVID-19. For example, our Company has taken various measures to protect our employees, including temperature checks before entering the workplace, mandatory mask-wearing, social distancing and authorizing remote work. We have also implemented staggered work hours to lower the risk that our employees might get infected on public transportation if they commute during peak hours. In particular, our remote work arrangements, coupled with stay-at-home orders and quarantines, pose challenges to our employees and our IT systems, and the extension of remote work arrangements could increase operational risk, including cybersecurity and IT systems management risks, and impair our ability to manage our business. The increased operational challenges could have a material and adverse effect on our business, financial conditions, and results of operations.
COVID-19 has also adversely impacted the recoverability of certain of our assets and resulted in the recognition of impairment charges for the year ended December 31, 2021. COVID-19 is expected to continue to impact the recoverability of our Company’s assets and lead to further impairment charges in the future.
If COVID-19 continues to adversely affect our business operations and financial results, the probability of the occurrence of other risks described in this Annual Report could also increase. Further, COVID-19 may materially and adversely affect our business, operations and financial results in manners that are not presently known to us or that we currently do not anticipate. The impact of COVID-19 is constantly changing. Although we are monitoring the situation, the extent to which COVID-19 impacts our business will depend largely on future events outside of our control, including ongoing developments in the pandemic, the success of containment measures, vaccination campaigns and other actions taken by governments around the world, as well as the overall condition and outlook of the global economy. However, the effects on our business, results of operations and financial condition could be material and adverse. We will continue to closely monitor our operations.
Significant volatility in copper prices could be detrimental to our Company’s profitability.
Copper is the principal raw material we use, accounting for a majority of the cost of sales. Our prevailing practice is to purchase copper at prices based on the average prevailing international spot market prices on the London Metal Exchange (the “LME”) for copper for the one month prior to purchase. The price of copper is affected by numerous factors beyond our control, including global economic and political conditions, supply and demand, inventory levels maintained by suppliers, potential disruptions in supply of copper (including as the result of economic sanctions on copper producers such as Russia), actions of participants in the commodities markets and currency exchange rates. As with other costs of production, changes in the price of copper may affect our Company’s cost of sales. Whether this has a material impact on our operating margins and financial results depends primarily on our Company’s ability to adjust selling prices to its customers, such that increases and decreases in the price of copper are fully reflected in those selling prices and customers continue to place orders. In the cases when we enter into a long-term sales contract at fixed selling prices, rising copper prices could render such contract onerous and our Company would be required to recognize losses from this onerous contract in the income statement. Most of our sales of manufactured products reflect the cost of copper used to manufacture those products at the time the products are ordered. In the ordinary course of business we maintain inventories of raw materials and finished products reasonably necessary for the conduct of our business. These inventories typically reflect the cost of copper prevailing in the market at the time of purchase. A long-term decrease in the price of copper would require our Company to revalue its inventory at periodic intervals to the then net realizable value, which could be below cost. Copper prices have been subject to considerable volatility, and it is not always possible to manage our copper purchases and inventory so as to neutralize the impact of copper price volatility. In addition, an excessive increase in the price of copper could result in fewer orders from customers or increased cost of sales given agreed sales prices, and negatively impact our Company. Accordingly, significant volatility in copper prices could have a material adverse effect on our business, financial condition and results of operations.
The ability of suppliers to deliver raw materials, parts and components and energy resources could affect our Company’s ability to manufacture products without disruption and in turn negatively affect our operations.
Our Company uses a range of materials, including copper, aluminum, polyethylene and polyvinyl chloride compound in the global production of our products, which come from numerous suppliers. Our operations and those of our suppliers are subject to disruption by supply chain issues due to economic, political and other factors largely beyond our Company’s control, including COVID-19 related supplier plant shutdowns or slowdowns, component shortages, supply chain disruptions and delays, fluctuations in shipping costs, work stoppages, labor shortages, financial issues such as supplier bankruptcy, information technology failures, and hazards such as fire, earthquakes, flooding, droughts or other natural disasters, new laws or regulations, global economic or political events including terrorist attacks and war, and suppliers’ allocations to other purchasers. The effects of climate change, including extreme weather events, long-term changes in temperature levels, water availability, supply costs impacted by increasing energy costs, or energy costs impacted by carbon prices or offsets may exacerbate these risks. Any inability of suppliers to deliver parts, components and manufacturing equipment to our Company’s manufacturing facilities, and any inability to manufacture without disruption, could affect our adversely business’s performance.
The markets in which we operate are highly competitive.
The wire and cable industry in the Asia Pacific region is highly competitive, and if we fail to successfully invest in and maintain product development, productivity improvements and customer service and support, sales of our products could be materially adversely affected. Our competitors include a large number of independent domestic and foreign suppliers. Certain competitors in each of our markets have substantially greater manufacturing, sales, research and financial resources than us. We and other wire and cable producers compete primarily on the basis of product quality and performance, reliability of supply, customer service, and price. To the extent that one or more of our competitors are more successful with respect to the primary competitive factors, our business could be materially adversely affected. In addition, our Company’s business could be materially adversely impacted if low margin wire and cable manufacturers in China enter into the markets where we operate, like they have in Australia and Singapore. Our Company’s business, financial condition and results of operations may also be materially adversely affected in the event it must compete with SOEs, which are often subsidized by the government such that they are protected against the challenges of market forces confronting private enterprises. When SOE’s enter the market, it can become untenable for private enterprises in competition with SOEs to conduct profitable operations when the SOEs are being subsidized by the government and may operate in a loss position for an extended period. Certain of our products are made to common specifications and may be interchangeable with the products of certain of our competitors. Since customers could potentially substitute our products with those of our competitors, customer loyalty is an important pillar of our business’s competitive position.
In addition, in order to remain competitive in the industry, our Company must periodically make substantial investments in capital equipment to ensure that our production processes are and remain state-of-the-art. Capital expenditures are not always predictable, as they are often driven by customer requirements for enhanced products. We cannot guarantee we will have the available capital to make such capital expenditures when required, which could materially adversely affect our business, financial condition and results of operations.
Alternative transmission technologies, such as wireless telecommunications, could materially reduce sales of our telecommunications products.
Our telecommunications cable business is subject to competition from other transmission technologies, principally wireless-based technologies. Wireless telecommunications businesses have sometimes made substantial inroads in early emerging markets where sufficient funding may not then be available to install the infrastructure necessary for market-wide fixed line telecommunications. In addition, the ease of use of wireless telecommunications may make that medium an attractive alternative in circumstances where access to fixed line telecommunications is limited. These technologies present significant competition in the markets in which we conduct or plan to conduct business and no assurance can be given that the future development and use of such alternative technologies will not materially adversely affect our business, financial condition and results of operations.
We operate in highly concentrated end markets.
Failure to properly execute customer projects in markets where a small number of customers are responsible for a large portion of our sales could materially adversely impact our ability to obtain similar contracts from other customers in that market and may result in material financial penalties. In certain of our markets, sales of manufactured products are highly concentrated in large SOEs or large private infrastructure developers. As those markets are often highly concentrated, the loss of individual customers in such markets could have a material adverse impact on our position in that market as a whole and could materially adversely affect our business, financial condition and results of operations.
Pacific Electric Wire & Cable Co., Ltd. may not perform its obligations under the Composite Services Agreement.
We engage in transactions in the ordinary course of business with our controlling shareholder, PEWC, including the purchase of certain raw materials and the distribution of PEWC’s products in various countries in the Asia Pacific region. We and PEWC have entered into a composite services agreement dated November 7, 1996, as amended and supplemented (the “Composite Services Agreement”), which contains provisions that define our relationship and the conduct of our respective businesses. The Composite Services Agreement is renewable at our option and is currently in force. Under the Composite Services Agreement, PEWC has agreed to supply APWC with copper and provides research and development for our products. Although PEWC has performed its obligations under the Composite Services Agreement to date, we are unable to ensure that PEWC will not in the future seek to limit, or be unable to perform in whole or in part, the business it conducts with our Company pursuant to the terms of the Composite Services Agreement. Given its controlling shareholder position, PEWC could in such instance seek to influence our response to any such events or occurrences. Any such limitation or inability to perform the Composite Services Agreement on PEWC’s part could have a material adverse effect on our business, financial condition and results of operations. (See “Item 10.C. Material Contracts” for a description of the Composite Services Agreement.)
Our insurance coverage does not cover all of our business risks.
Our global operations are subject to many risks including errors and omissions, infrastructure disruptions such as large-scale outages or interruptions of service from utilities or telecommunications providers, supply chain interruptions, third-party liabilities and fires or natural disasters. Our Company maintains insurance policies covering certain buildings, machinery and equipment against specified amounts of damage or loss caused by fire, flooding, other natural disasters and burglary and theft. Our Company does not carry insurance for consequential loss arising from business interruptions or political disturbances and does not carry product liability insurance. Consequently, the amount of our insurance coverage may not be adequate to cover all potential claims or liabilities, and we may be forced to bear substantial costs resulting from the lack of adequate insurance. No assurance can be given that we will not incur losses beyond the limits or outside the scope of coverage of our insurance policies. Accordingly, we may be subject to an uninsured or under-insured loss in such situations. Any failure to maintain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition and results of operations.
A significant number of our ROW employees are members of employees’ unions.
A significant number of the employees of our Rest of World (“ROW”) segment are members of employees’ unions. Failure to successfully negotiate and/or renew collective agreements, strikes, or other labor disputes could result in a disruption of our operations. Any such labor dispute could lead to a disruption of our operations, hindering our ability to serve our customers, and could have a material adverse effect on our Company and could materially adversely affect our business, financial condition and results of operations.
Our business could be harmed if we fail to attract and retain qualified personnel.
If we fail to retain our key employees and attract qualified personnel by investing adequate resources to develop our human capital, our business may be harmed. The loss of any of our executive officers or other key employees could have a material adverse effect on our business, financial condition and results of operations. The loss of executive officers or key employees could impair customer relationships and result in the loss of vital industry knowledge, expertise, and experience. There is also a risk of losing key employees to our competitors, which could pose a possible risk of the theft of trade secrets, with competitors then gaining valuable information about our manufacturing process. Increased costs associated with recruiting, motivating and retaining qualified personnel could have a negative impact on our profitability. Our Company’s future success depends on its continued ability to attract and retain talented and qualified personnel.
Our operations are subject to environmental protection laws and regulations, which impose compliance costs and subject us to potential liabilities should we violate any of these laws and regulations.
We are subject to certain environmental protection laws and regulations governing our operations and the use, handling, disposal and remediation of hazardous substances used by us. We could incur environmental liability from our manufacturing activities in the event of a release or discharge by us of a hazardous substance. Under certain environmental laws, we could be held responsible for the remediation of any hazardous substance contamination at our facilities and at third party waste disposal sites and could also be held liable for any consequences arising out of human exposure to such substances or other environmental damage. There can be no assurance that the costs of complying with environmental, health and safety laws and requirements arising from our current operations, or the liabilities arising from past releases of, or exposure to, hazardous substances, will not result in future liabilities incurred, or expenditures payable, by us that would materially adversely affect our business, financial condition and results of operations.
Information systems failure or cybersecurity breaches could have a material adverse effect on our business, financial condition, and results of operations.
APWC's subsidiaries each have their respective information systems to support the operation of such subsidiary. While APWC’s operating subsidiaries vary in the degree of reliance that they place on their information systems, any failure or interruption of these systems could materially adversely affect our Company’s business, financial condition and results of operations. Among other things, financial data may be corrupted and financial information may not be accurately reported or presented in a timely manner, which could impair our Company’s ability to timely file periodic or annual reports with the SEC or timely disseminate material information to shareholders. Because there is no unified framework for administering information systems amongst APWC’s subsidiaries, our competitors with a unified framework for administering information systems across their subsidiaries may have a competitive advantage over us and may be able to more efficiently administer such systems and respond to incidents and minimize risk to their business.
Cybersecurity presents risks and threats to us because intense competition in the wire and cable sector renders the Company vulnerable to theft and copying of design specifications. While our Company relies upon its majority shareholder, PEWC, for much of our Company's research and development, our Company's products are designed precisely to meet customer specifications for the applications for which they are intended. Cybersecurity risks create the potential for a material adverse impact on our Company’s business, financial condition and result of operations due to, but not limited to, losing intellectual property, implementing reactive measures, managing litigation or investigations, addressing reputational harm, or losing a competitive advantage. To date, none of the cyber incidents identified have had a material adverse effect on our business. However, we do not have visibility into all unauthorized incursions and our systems may be experiencing ongoing incursions of which we are not aware. Mitigating these risks requires ongoing management oversight to ensure that sufficient controls and procedures are in place for appropriate persons to receive pertinent cybersecurity risk information to take appropriate action. We cannot offer any assurance that those controls and procedures will be sufficient to protect against cybersecurity risks and that our business, financial condition and results of operations will not be materially and adversely affected as a result of any such failure.
Increased reliance on information systems requires the implementation of information technology (“IT”) security measures to protect networks, computers, programs and data from attack, damage or unauthorized access and ensure the confidentiality, availability and integrity of Company data. Our Company employs safeguards, both technological and contractual, in order to protect its proprietary interests and those of its customers and third-party licensors, including, without limitation, certain insurance against theft and risk of loss. However, we cannot guarantee that such safeguards will protect our Company from all types of IT and cybersecurity threats. If our Common SharesCompany’s IT and cybersecurity measures are delisted, investorscompromised or otherwise fail to protect systems, networks and data, or if an event of force majeure occurs and our Company’s disaster recovery plan does not operating effectively, our Company’s business may be disrupted and stand to lose assets, reputation and business, and potentially face regulatory fines and litigation as well as the cost of remediation, which could materially adversely impact our Company’s business, financial condition and results of operations.
Our multinational operations and structure subject us to potentially adverse tax consequences.
We conduct our business through operating subsidiaries and report our taxable income in multiple jurisdictions based upon our business operations in those jurisdictions. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be contested or overturned by jurisdictional tax authorities, which may have
difficulty disposinga significant impact on our global provision for income taxes, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of
their shares.our operations.
Certain government agencies in jurisdictions where we do business have had an extended focus on issues related to the taxation of multinational companies. In addition, the Organization for Economic Co-operation and Development is conducting a project focused on base erosion and profit shifting in international structures, which seeks to establish certain international standards for taxing the worldwide income of multinational companies. As a result of these developments, the tax laws of certain countries in which we do business could change on a prospective or retroactive basis, and any such changes could increase our liabilities for taxes, interest and penalties, and therefore could harm our business, cash flows, results of operations and financial position.
Pursuant to the Bermuda Economic Substance Act 2018 (“ESA”) which commenced December 31, 2018, an entity that falls within the scope of the ESA and carries on as a business any of the “relevant activities” referred to in the ESA, must comply with economic substance requirements. The “relevant activities” include: banking, insurance, fund management, financing and leasing, headquarters, shipping, distribution and service center, intellectual property and holding entity. An in-scope entity which is engaged in any of the “relevant activities” must satisfy an economic substance test, by performing core income-generating activities in the jurisdiction, being directed and managed in the jurisdiction and, having within the jurisdiction (i) an adequate amount of operating expenditure, (ii) adequate physical presence and (iii) an adequate number of qualified full-time employees or other personnel.
Risks Related to our Financial Activities
Restrictive covenants and default provisions in our existing debt agreements may materially restrict our operations as well as adversely affect our liquidity, business, financial condition and results of operations.
If our business units do not generate sufficient cash flows from operations, we may be unable to make required payments on our debt, including debt secured by our or our subsidiaries’ assets. Any such failure to make any such payment could have a material adverse effect on our liquidity, business, financial condition and results of operations. In addition our debt agreements contain restrictive covenants and default provisions. Covenants in the agreements governing our existing debt, and debt we may incur in the future, may materially restrict our operations, including our ability to incur debt, pay dividends, make certain investments and payments, and encumber or dispose of assets. In addition, any global economic deterioration may cause us to incur significant net losses or force us to assume considerable liabilities. We cannot make assurances that we will be able to remain in compliance with our financial covenants, which, as a result, may lead to a default. Any such default may thereby restrict our ability to access unutilized credit facilities or the global capital markets to meet our liquidity needs. Furthermore, a default under certain debt agreements by APWC or APWC’s subsidiaries may trigger cross-defaults under other debt agreements. In the event of default, we may not be able to cure the default or obtain a timely waiver. An event of default under any agreement governing our existing or future debt, if not cured or timely waived, could have a material adverse effect on our liquidity, business, financial condition and results of operations. Please see Section 5.B. (“Liquidity and Capital Resources”) of this Annual Report and Note 27(c) of our consolidated financial statements referenced in Item 18 of this Annual Report for a further discussion of our secured and unsecured indebtedness.
We face uncertainties relating to the phasing out of LIBOR.
The one-week and two-month USD LIBOR ceased being published after December 31, 2021. The ICE Benchmark Administration Limited (the “IBA”), the administrator for LIBOR, announced on March 5, 2021 that it will cease publishing the remaining USD LIBOR tenors (overnight, one-month, three-month, six-month and 12-month) after June 30, 2023. In the United States, the Adjustable Interest Rate (LIBOR) Act was signed into law on March 15, 2022 directing the Federal Reserve Board of Governors to select SOFR (Secured Overnight Financing Rate) published by the Federal Reserve Bank of New York to replace LIBOR in certain financial contracts after June 30, 2023. On November 21, 2019,December 16, 2022 the Federal Reserve Board adopted a final rule implementing the LIBOR Act, which included identifying benchmark rates based on SOFR. For contracts not subject to US law, it remains to be seen whether SOFR or some other alternative reference rate will attain market acceptance as replacements of LIBOR. Discontinuation of LIBOR and uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the amounts of interest we pay under our debt arrangements and materially adversely affect our business, financial condition and results of operations.
Foreign exchange fluctuations could materially impact our financial performance and our financial condition.
Our principal operations and properties are located in the three regions that constitute our business segments, namely the North Asia, Thailand and ROW regions. Although our reporting currency is the U.S. dollar, the functional currency of our Thailand region, which accounted for 40% of sales in 2022, is the Thai Baht. The functional currencies of our ROW region, which accounted for 42% of sales in 2022, are the Australian dollar and the Singapore dollar. The functional currencies for our North Asia operations, which in total accounted for 18% of sales in 2022, are divided into two groups: (1) the PRC Subsidiaries, whose functional currency is the RMB, and (2) Crown Century, whose functional currency is the U.S. dollar. Accordingly, the functional currency accounts of these operations are all translated into U.S. dollars utilizing the reporting date exchange rate for balance sheet accounts, and an average exchange rate for the year for the income statement accounts, for reporting purposes. Any devaluation of the Baht, the Australian dollar, the Singapore dollar, or the RMB against the U.S. dollar would adversely affect our financial performance, as measured in U.S. dollars.
Our Company received written notificationconducts business in many foreign currencies and is subject to exchange rate risk on cash flows related to sales, expenses, financing and investment transactions. A substantial portion of our aggregate revenues is denominated in the following currencies: RMB, Baht, Australian dollars and Singapore dollars, while our purchases of raw materials and expenditures related to equipment upgrades are largely denominated in U.S. dollars. Any devaluation of the Baht, the Australian dollar, the Singapore dollar or the RMB against foreign currencies (such as the U.S. Dollar) would increase the effective cost of transactions denominated in such other foreign currencies. This would have an adverse impact on our operations and cash flows. Likewise, an increase in U.S. dollar borrowing costs and any increase in the strength of the U.S. dollar in foreign exchange markets (which could also increase borrowing rates) could materially adversely affect our business in the markets where we have operating plants, such as Thailand, China, Singapore and Australia. Consequently, adverse movements in exchange rates could have a material adverse effect on our business, financial condition and results of operations.
In addition, a portion of our investment properties and financial instruments are denominated in currencies other than the U.S. dollar. Accordingly, our investment results will be subject to possible currency rate fluctuations as well as the volatility of overseas capital markets. Our results of operations may be materially impacted by those fluctuations and volatility.
Significant impairment charges could materially adversely impact our results of operations.
In prior years, we have on occasion recognized impairment charges on certain property, plant and equipment due to lack of profitability. An impairment charge may be incurred for various reasons including, but not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on our business or a material adverse change in any material relationships with our clients. If we recognize significant impairment charges, our results of operations may be materially adversely affected.
Risk Related to the Regions in Which We Operate
We face risks relating to our operations in Thailand.
A substantial portion of our Thai operations consist of the manufacture of telecommunication and power cables and sales of those products for use in various construction and infrastructure projects in Thailand. The performance of our
Company’s Thai operations is affected by the political and economic situation in Thailand. In recent years, the level of government involvement in infrastructure development has tended to track increases or contractions in Thailand’s gross domestic product and the Thai economy has been highly cyclical and volatile, depending for economic growth in substantial part on a number of government initiatives for economic expansion. Overall, the construction industry and infrastructure projects have slowed considerably, thereby affecting local sales, placing competitive pressure on prices and prompting our Company to rationalize Thai operations and actively seek overseas markets. Political tensions remain high in Thailand and political instability in Thailand tends to diminish governmental focus on infrastructure development projects, which can materially adversely impact the volume of sales to (and payment by) our customers who are engaged in large infrastructure projects and, consequently, materially adversely affect our business, financial condition and results of operations. In addition, our Thai operations could be materially adversely impacted if low margin wire and cable manufacturers from China, including SOEs, were to enter the Thailand market.
Our auditor’s China affiliate, like other independent registered public accounting firms operating in China, has not been subject to inspection by the PCAOB and consequently investors are deprived of the benefits of such inspection.
Our auditor, who issued the audit report included in this Annual Report, is a Taiwan-based accounting firm registered with the PCAOB and is subject to regular inspection by the PCAOB. However, our auditor’s China affiliate is located in, and organized under the laws of, the PRC, which is a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities. If the PCAOB determines that it is unable to inspect or investigate completely because of a position taken by the PRC government, trading in our securities could be prohibited in the U.S. and ultimately delisted.
On December 18, 2020, the United States enacted the Holding Foreign Companies Accountable Act (the "Market Value Notification Letter"“HFCAA”), which requires, amongst other things, that (i) the SEC identify issuers that retain an auditor that has a branch or office that is located in a foreign jurisdiction and that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by foreign authority and that (ii) the SEC prohibit the securities of any issuer from being traded on any of the U.S. national securities exchanges, such as Nasdaq, or on the U.S. “over-the-counter” markets, if the auditor of the issuer’s financial statements is not subject to PCAOB inspections for three consecutive “non-inspection” years. On April 5, 2021, the SEC’s interim final rule to implement the disclosure and submission requirements of the HFCAA was published in the U.S. Federal Register. Regarding how the term “retain” should be interpreted, the SEC noted in the interim final rule that the HFCAA does not define the term “retain”, and requested comment on how the term “retain” should be understood for purposes of the HFCAA.
On September 22, 2021, the PCAOB adopted a final rule implementing the HFCAA, which provides a framework for the PCAOB to use when determining, as contemplated under the HFCAA, whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in that jurisdiction.
On December 2, 2021, the SEC issued amendments effective January 10, 2022 to finalize the interim final rules previously adopted in March 2021, and established procedures to identify issuers and prohibit the trading of the securities of certain registrants as required by the HFCAA. The final rule included the SEC’s statement that a registered public accounting firm is “retained” by a registrant, as that term is used in Section 104(i) of the Sarbanes-Oxley Act, when the registered public accounting firm signs the accountant’s report on the registrant’s consolidated financial statements that is included in a registrant’s Exchange Act report.
On December 16, 2021, the SEC announced that the PCAOB designated China and Hong Kong as the jurisdictions where the PCAOB is not allowed to conduct full and complete audit inspections as mandated under the HFCAA.
On August 26, 2022, the China Securities Regulatory Commission (“CSRC”) from The Nasdaq Stock Market LLC ("Nasdaq"and the Ministry of Finance of the PRC (“MOF”) notifyingexecuted a Statement of Protocol with the CompanyPCAOB, including detailed provisions for each stage and requirement of PCAOB inspections and investigations (the “Agreement”), to facilitate the cooperation between the PCAOB and the PRC authorities needed for the PCAOB to conduct its mandated oversight of firms headquartered in mainland China and Hong Kong.
On December 15, 2022 the PCAOB issued its HFCAA Determination Report vacating its December 16, 2021 determinations as to China and Hong Kong. Should the PCAOB encounter any impediment to conducting an inspection or investigation of auditors in mainland China or Hong Kong as a result of a position taken by an authority in either jurisdiction, the PCAOB noted that it would act immediately to consider the need to issue new determinations consistent with the HFCAA.
On December 15, 2022 the SEC announced that the PCAOB announced that it was
notable, in
compliance with2022, to inspect and investigate completely issuer audit engagements of PCAOB-registered public accounting firms headquartered in China and Hong Kong. The SEC noted the
$5 million minimum market value of publicly held shares requirement set forthnecessity for continued cooperation and for the PCAOB to have full access for inspections and investigations in 2023 and beyond, and absent such complete access for three consecutive years, the SEC would prohibit trading in the
Nasdaq rulessecurities of issuers engaging those audit firms, as required by the HFCAA. The SEC stated that the PCAOB’s 2022 determination resets the three-year clock for
listing on the Nasdaq Global Market tier. In accordance with the Nasdaq Listing Rules, the Company was provided 180 calendar days, or until May 19, 2020 (the "Compliance Period"), to regain compliance. On
April 16, 2020, Nasdaq announced that, as of April 16, 2020, NasdaqDecember 29, 2022, the Consolidated Appropriations Act, 2023 was
tollingsigned into law amending the
compliance periods for bid price and market value of publicly held shares (“MVPHS”) requirements (collectively,HFCAA by shortening the
“Price-based Requirements”) for all listed companies through June 30, 2020. As a result, companies presently in compliance periods for any Price-based Requirements will remain at that same stage of the process through June 30, 2020, and, commencing on July 1, 2020, companies will receive the balance of any pending compliance period in effect at the start of the tolling period to regain compliance.Accordingly, since the Company had 33 calendar days remaining in its MVPHS compliance period as of April 16, 2020, it will, upon reinstatement of the Price-based Requirements, still have 33 calendar days from July 1, 2020, or until August 3, 2020, to regain compliance Nasdaq has informed us that the Company can regain compliance, either during the suspension or during the compliance period resuming after the suspension, by evidencing compliance with the Price-based Requirementsnon-inspection timeline for a minimum of 10 consecutivepotential trading days. For the Companyprohibition from three (3) years to regain compliance, the market valuetwo (2) years.
The auditor of our
publicly held sharesPRC-based subsidiaries is located in the PRC and is an affiliate of APWC’s Taiwan-based auditor that signs APWC’s audit report. As the PCAOB begins audit inspections in 2023 we cannot assure you that we will not be identified by the SEC as an issuer that has
retained an auditor that, for whatever reasons, the PCAOB determines it is unable to
equalinspect or
exceed $5 million forinvestigate completely. In addition, there can be no assurance that, if we have a
minimum of 10 consecutive business days. On April 22, 2020,“non-inspection” year, we will be able to take adequate remedial measures in response thereto. If any such event were to occur, trading in our securities could be prohibited under the
minimum market value of our publicly held Common Shares was $3,592,234. IfHFCAA. As such, we cannot assure you that we will be able to maintain the
Company does not regain compliance by August 3, 2020, Nasdaq has informed us that Nasdaq will delist the Company's Common Shares from Nasdaq unless the Company requests a hearing before the11
Nasdaq Hearings Panel or unless the Company transfers its listing of the Common Shares on Nasdaq or that you will be allowed to trade the Common Shares in the United States on the “over-the-counter” markets or otherwise, which could material affect the value of the Common Shares.
The lack of PCAOB inspections in China prevented the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting firm, depriving us and our investors of the benefits of such PCAOB inspections. Such inability of the PCAOB to conduct inspections of auditors in China makes it difficult to evaluate the effectiveness of our independent registered public accounting firm’s China affiliate’s audit and quality control procedures, which could cause investors and potential investors to lose confidence in our audit procedures and reported financial information.
It remains unclear what the SEC’s implementation process related to the Capital Market tier,above rules and amendments will entail or what further actions the SEC, the PCAOB or Nasdaq will take to address these issues and what impact those actions will have on companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange. The above rules and amendments and any additional actions, proceedings, or new rules resulting from these efforts to increase U.S. regulatory access to audit information could create some uncertainty for investors, and the market price of our Common Shares could be adversely affected. If our auditor is unable to meet the PCAOB inspection requirement, we may be required to engage a new audit firm, which transfer would require significant expense and management time. If we cannot engage a new auditor within a reasonable time under reasonable terms, our Common Shares may be delisted, and the price of our Common Shares may significantly decrease.
There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations, the PRC legal system may limit our Company’s remedies, which may impact our ability to enforce agreements in the PRC with third parties, and changes in policies, laws, rules and regulations in the PRC could adversely affect us.
Our operations conducted in the PRC are governed by PRC laws, rules and regulations and our PRC subsidiaries are subject to laws, rules and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. China has not developed a fully integrated legal system and enacted laws, rules and regulations may not sufficiently cover all aspects of economic activities or may be subject to a significant degree of interpretation by PRC regulatory agencies and courts. As these laws, rules and regulations are relatively new and quickly evolving and because of the limited number of published decisions and the non-precedential nature of these decisions, and because the laws, rules and regulations often give the relevant regulator certain discretion in how to enforce them, the interpretation and enforcement of these laws and regulations involves uncertainties and can be inconsistent and unpredictable. Therefore, it is possible that our existing operations may be found not to be in compliance with relevant law and regulations in the future.
Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, the remedies and the legal protection we enjoy may be limited in the event of any claims or disputes with third parties. In addition, any litigation in China may be protracted and could result in substantial costs and diversion of resources and management attention. In terms of enforcement, agreements which are governed by PRC laws may be more difficult to enforce by legal or arbitral proceedings in the PRC than in countries with more developed legal systems. Even if the agreements generally provide for arbitral proceedings for disputes arising out of the agreements to be in another jurisdiction, in practice it may be difficult for us to obtain effective enforcement in the PRC of an arbitral award obtained in that jurisdiction.
Moreover, government policies, internal rules, laws and regulations, particularly for local applications, may be varied and enacted without sufficient prior notice or announcement to the public on a timely basis, and which may be effective retroactively. Consequently, we may not be aware of a violation of a new or updated policy or rule until we are notified by the regulating authority after the violating event has occurred.
Pursuant to the “Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law” (the “Opinions”) issued by the Central Committee of the Chinese Communist Party and the State Council on July 6, 2021, among others, the PRC government seeks to strengthen judicial cooperation in cross-border supervision and law enforcement on securities activities. On December 24, 2021, the CSRC published the Provisions of the State Council of the PRC on the Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), and Administrative Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments), which, among others, clarified the scope of overseas offering and listing by a PRC company, and listed a number of circumstances where overseas offering is prohibited.
With an effective date of March 31, 2023, the CSRC on February 17, 2023 published the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”). The new regulations for the filing-based administration of overseas securities offering and listing by companies that are incorporated in the PRC and the domestic operating entities of companies whose securities are indirectly offered and listed overseas (collectively referred to as "domestic companies") are, and are made up of six sets of documents, namely, the Trial Measures and five supporting guidelines. The CSRC also issued an accompanying "Notes on the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies" which provides an explanation of the Trial Measures. We are presently reviewing the Trial Measures and the changes from the prior drafts circulated by the CSRC to evaluate the impact, whether positive or adverse, that these regulations on overseas securities issuance by China-based organizations may have on our PRC operations, financial position and business strategies, particularly if we were to seek a spin-off and foreign listing of our Chinese entities.
As the PRC legal system continues to evolve, we cannot predict if future developments in the PRC legal system could be detrimental to our Company and have a material adverse effect on its business, financial condition, results of operations, and the value of our Common Shares.
Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business, financial conditions and results of operations.
Certain of our subsidiaries operate in the PRC, where the enforcement of laws, rules and regulations can change quickly with little advance notice. The PRC government may intervene or influence the operations of our PRC subsidiaries at any time, or may begin to exert more control over offerings conducted overseas. Accordingly, our business, financial condition and results of operations may be affected to a significant degree by political, economic and social conditions in the PRC generally.
The PRC economy differs from the economies of most developed countries in many respects, including the degree of government involvement and control, with a substantial portion of the productive assets in China still managed by the government. The PRC government regulates industry development by imposing industrial policies and exerting considerable direct and indirect influence on the development of the PRC economy by controlling, among others, the allocation of resources, foreign exchange, growth rate and the level of development, monetary policy, taxation and foreign investment. The PRC government has significant influence over business activities and has become more involved in regulating China based companies. Legislative and enforcement actions and trends by the PRC authorities are not always predictable. In recent years the PRC government has enhance regulation in areas such as anti-monopoly, cybersecurity and data privacy.
The PRC Anti-Monopoly Law (“AML”) includes oversight of concentration of undertakings, monopoly agreements and abusive behavior by companies with market dominance and was amended effective August 1, 2022 to include, among others, increased penalties for anti-trust violations. The State Administration for Market Regulation (“SAMR”), the anti-monopoly enforcement agency in the PRC, has in recent years strengthened enforcement under the AML, with increased investigations and the levying of significant fines. While the business of APWC may not fall within the industries where recent active anti-monopoly enforcement efforts have focused, we cannot assure you that we will not be affected, either directly or indirectly, by this increased focus. In addition, to comply with existing and new anti-monopoly laws, regulations and guidance which are constantly evolving, we may need to devote additional resources and efforts, including adjusting investment strategy and business arrangements, which may adversely affect our business, growth prospects, and the value of our Common Shares.
The 2017 PRC Cybersecurity Law (“CSL”) was enacted with the aim of increasing data protection, data localization, and cybersecurity in the interest of national security. Recently enacted laws include the PRC Data Security Law, effective September 1, 2021 (the “DSL”) and the Personal Information Protection Law, effective November 1, 2021 (the “PIPL”). The DSL and PIPL, together with the CSL, form the over-arching framework that governs data protection and cybersecurity in the PRC. The CSL focuses on cybersecurity and the protection of the critical information infrastructure (“CII”), the DSL focuses on regulating “important data” and data processing activities that would have an impact on national security, and the PIPL focuses on protecting personal information.
On August 17, 2021, China released the text of the “Critical Information Infrastructure Security Protection Regulations” (“CII Regulations”) which became effective September 1, 2021. Under the CII Regulations, critical information infrastructure refers to important network infrastructure and information systems, in important industries and sectors, and requires the appropriate regulatory and administrative departments in these sectors (“Protection Departments”) to formulate CII identification rules based on the actual situations of their respective sectors and submit such identification rules to the Ministry of Public Security (“MPS”) for recording. The Protection Departments are responsible for identifying the CII in their respective sectors and promptly notifying relevant operators.
On December 28, 2021, the Cyberspace Administration of China (“CAC”) and the MPS, among others, adopted Cybersecurity Review Measures (“CRM”) effective February 15, 2022, replacing the 2020 version. CRM Article I state the measures were formulated in accordance with the National Security Law of the PRC, the CSL, the DSL and the CII Regulations. The CRM require CII operators to undergo a security review if the procurement of any “network products and services” affects or may affect China’s national security. Online platform operators, holding the personal information of more than 1 million users and newly listing on foreign markets, must also report for a cybersecurity review with the Cybersecurity Review Office of the CAC. Whether the cybersecurity review requirement will apply if the listing company’s subsidiary is a PRC entity (as is the case for APWC) is undetermined.
Neither ‘important data’ nor ‘core data’ have been comprehensively defined in PRC law. ‘Important data’ is a unique category of data introduced by the CSL and adopted into the DSL, but was defined in neither law. In Q4, 2022, the National Information Security Standardization Technical Committee (TC260) released a draft guidance document, which provides a methodology and set of criteria for grading data as either ‘important data’ or ‘core data’, however the advice is not directly operational in the absence of the industry catalogues themselves and there has been no indication yet when these catalogues will be released. To the extent that any data that APWC’s PRC subsidiaries may in the future collect and process within the PRC and which falls within the scope of “important data”, APWC will be subject to various statutory obligations, such as conducting a national security review if the processing activity may affect national security, and periodically carrying out requisite risk assessments.
Compliance with current obligations and potential future obligations that may be promulgated pursuant to any of the CSL, DSL, PIPL, CII Regulations, CRM or other related laws, rules or regulations, could require us to incur additional costs and expend resources, including the updating of internal procedures and hiring of external consultants to conduct assessments, which would increase APWC’s costs and adversely affect profitability.
As final rules and implementing regulations have yet to be issued, the implications and applications of recent enforcement and legislative actions remain unclear at the moment and provide minimal guidance. Many of the economic reforms carried out by the PRC government are unprecedented or experimental and expected to be refined and improved over time. As such, we cannot assure you that APWC and APWC’s operations in the PRC will not be affected, either directly or indirectly, by such refinement or changes in government policy, or the interpretation of, or enforcement of, such laws and regulations, which could have a material adverse effect on our business, financial condition, results of operations and the value of our Common Shares.
Uncertainties with respect to the interpretation and implementation of the PRC Foreign Investment Law and Implementation Regulations may affect our Company’s Corporate Governance.
The PRC Foreign Investment Law and the Regulations for Implementation of the Foreign Investment Law (collectively the “FIL”) took effect January 1, 2020 and replaced the trio of prior laws governing foreign investment in China, namely, the Law on Sino-Foreign Equity Joint Ventures, the Law on Sino-Foreign Cooperative Joint Ventures, and the Law on Wholly Foreign-Owned Enterprises, together with their implementation regulations (the “Old FIL Laws”).
Several key changes under the FIL include protection of foreign IP rights and trade secrets, and equal treatment of domestic and foreign companies in government procurement. As the Old FIL Laws were repealed at the same time the FIL became effective, foreign-invested enterprises (“FIE”) became subject to the PRC Company Law and Partnership Enterprise Law, which stipulate different rules on corporate governance, voting, profit distributions and equity transfer restrictions, among others. FIEs established before the FIL’s effective date have a five-year transition period to convert to
the appropriate corporate form and make necessary adjustments to their articles of association and other documents to comply with such rules, which now apply to foreign and domestic investors alike. The FIL imposes information reporting requirements on foreign investors and FIEs and any found to be non-compliant with these reporting obligations may be subject to fines or administrative liabilities.
Since the FIL is relatively new, uncertainties still exist in relation to its interpretation and implementation. The FIL may affect our relevant corporate governance practices and increase our compliance costs. We continue our review of the provisions regarding equity interest transfers and distribution of profits or remaining assets, and the specific adjustments FIEs must undertake.
On December 27, 2021, the National Development and Reform Commission (“NDRC”) and the Ministry of Commerce of the PRC (“MOFCOM”) issued Special Administrative Measures for Foreign Investment Access (Negative List) (2021 Version) effective January 1, 2022, replacing the 2020 Version. The wire & cable industry is not within the sector where foreign investment is prohibited or restricted in either the 2020 or 2021 Version. Accordingly, APWC’s PRC business is unlikely to be directly affected by the rules and enforcement actions targeting variable interest entity structures, even if APWC proposes a spin-off of its PRC entities and an offshore listing. However, it is not known whether these matters will be addressed by additional laws or regulations promulgated pursuant to the FIL. The Foreign Investment Law and the Implementation Regulations could be interpreted and implemented in a manner that could have a material adverse effect on our Company’s business, financial condition and results of operations.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our PRC subsidiaries, which could materially adversely affect our ability to fund and expand our business.
We conduct substantial business operations in China. We may make loans or capital contributions to our PRC subsidiaries. Loans or capital contributions by APWC or any of our offshore subsidiaries to our PRC subsidiaries, which are treated as FIEs under PRC law, may be subject to PRC regulations and/or foreign exchange loan registrations. Such loans to any of our PRC subsidiaries to finance their activities generally cannot exceed statutory limits and must be filed with China’s State Administration of Foreign Exchange (the “SAFE”). We may also decide to finance our PRC subsidiaries by means of capital contributions, in which case the PRC subsidiary is required to register the details of the capital contribution with the relevant governmental authorities in China.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans or capital contributions by our Company to our PRC subsidiaries and conversion of such loans or capital contributions into RMB. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially adversely affect our ability to fund and expand our business, and could materially adversely affect or business, financial condition and results of operations.
The PRC government’s control of currency conversion and expatriation of funds may affect our liquidity.
The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Our PRC subsidiaries represent the majority of the sales in our North Asia segment, which segment constituted approximately 18% of our sales in 2022. Substantially all revenues of our subsidiaries organized under the laws of the PRC, are denominated in RMB. Shortages in the availability of foreign currency in the PRC may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or to make other payments to us, or otherwise to satisfy their foreign currency-denominated obligations. Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest payments, and trade-related payments, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements, including, among others, submission of relevant documentary evidence of such transactions to designated foreign exchange banks in the PRC for processing of relevant payments. We are required to present relevant documentary evidence of such transactions and conduct such transactions at designated foreign exchange banks in the PRC. However, for any PRC company, dividends can be declared and paid only out of the retained earnings of that company under PRC law and may be subject to taxation. As a result, our PRC subsidiaries may be restricted in their ability to transfer cash outside of the PRC whether in the form of dividends, loans, and advances. If our PRC subsidiaries distribute dividends, these restrictions and requirements could reduce the amount of distributions that we would receive, which could in turn restrict our ability to fund our operations, generate income, pay dividends, and service our indebtedness.
Furthermore, approval from SAFE or its local branch is required where RMB are to be converted into foreign currencies and remitted out of the PRC for payments of capital account items, such as the repayment of loans denominated in foreign currencies. Without a prior approval from SAFE or its local branch, cash generated from the operations of our PRC subsidiaries may not be used to repay debt in a currency other than the RMB owed by such subsidiaries to entities outside the PRC, or make other payments of capital account items outside the PRC in a currency other than the RMB. The PRC government may also at its discretion, restrict access in the future to foreign currencies for current account transactions. In the current regime of stringent regulation of outflow of capital, RMB outflow may face the same level of scrutiny by the PRC government as the outflow of foreign currencies.
Additionally, because repatriation of funds of our PRC subsidiaries requires the prior approval of SAFE and/or its authorized bank and/or compliance with certain procedural requirements, such repatriation could be delayed, restricted, or limited. There can be no assurance that the Company then meetrules and regulations pursuant to which SAFE grants or denies such approval or stipulates the criteriaprocedural requirements will not change in a way that adversely affects the ability of our PRC subsidiaries to expatriate funds out of the PRC, thereby negatively affecting our liquidity, our results of operations and the value of our Common Shares.
Political or social instability, including tensions between PRC and Taiwan, may materially adversely affect our Company’s business, financial condition, and results of operations.
Political or social instability in China could also materially adversely affect our business operations or financial condition. Lack of political or social certainty exposes our operations to increased risk of adverse or unpredictable actions by PRC government officials. For example, APWC’s principal office is located in Taipei, Taiwan, and any escalation in political tensions between the PRC and the government of Taiwan could materially adversely impact our ability to manage our operations in the PRC efficiently or without third party interference. The PRC government has long advocated a one-China policy with regard to the Republic of China. Any overtly aggressive actions by the PRC towards Taiwan could have a materially destabilizing impact on Taiwan generally, and on our business in particular, and could materially and adversely affect our business, financial condition and results of operations.
PRC SOEs have competitive advantages and our business and operations may be materially and adversely affected in the event we must compete with such SOEs.
Much of the PRC's manufacturing output is still conducted through SOEs, which are often subsidized by the government such that they are protected against the challenges of market forces confronting private enterprises. As a consequence, it can become untenable for transferprivate enterprises in competition with SOEs to conduct profitable operations when the SOEs are being subsidized by the government and may operate in a loss position for an extended period. Our Company’s business, financial condition and results of operations may be materially adversely affected in the event it must compete with such SOEs.
Risks Related to the Common Shares and APWC
The Common Shares may be delisted from Nasdaq, which could affect their market price and liquidity.
The Common Shares are currently listed on Nasdaq under the trading symbol “APWC” on the Capital Market tier. AmongstIn order for the Common Shares to remain listed on the Nasdaq Capital Market tier, we must continue to meet certain minimum financial and other requirements including, without limitation, maintaining a closing bid price for the Common Shares of at least $1.00 per share. Nasdaq’s rules provide for the delisting of the Common Shares if the closing bid price for the Common Shares falls below $1.00 per share for 30 consecutive business days and we are unable to regain compliance with the applicable requirements in the time permitted by Nasdaq.
In addition to Nasdaq’s enumerated criteria for continued listing on the Capital Market tier,
is that the minimum market value of publicly held Common Shares of the Company equal or exceed $1 million and that the minimum closing bid price of the Common Shares equal or exceed $1 per share. On April 22, 2020, the closing bid price for our Common Shares was $1.01.In addition to the specified criteria for continued listing, Nasdaq also has broad discretionary public interest authority that it can exercise to apply additional or more stringent criteria for the continued listing of the Common Shares, or suspend or delist securities even though the securities met all enumerated criteria for continued listing on Nasdaq. We cannot assure you that Nasdaq will not exercise such discretionary authority.
In addition, in accordance with the provisions of the Exchange Control Act 1972, as amended, and related regulations of Bermuda, the permission of the Bermuda Monetary Authority (the “BMA”“BMA”) is required for all issuances and transfers of shares (which includes ourthe Common Shares) of Bermuda companies to or from a non-resident of Bermuda for exchange control purposes, other than in cases where the BMA has granted a general permission. The BMA, in its notice to the
public dated June 1, 2005, has granted a general permission for the issue and subsequent transfer of any securities of a Bermuda company from and/or to a non-resident of Bermuda for exchange control purposes for so long as any “Equity Securities” of
the companyAPWC (which include
ourthe Common Shares) are listed on an “Appointed Stock Exchange” (which would include Nasdaq). In granting the general permission the BMA accepts no responsibility for
ourAPWC’s financial soundness or the correctness of any of the statements made or opinions expressed herein. Consequently, if
ourthe Common Shares are delisted from Nasdaq, it will be necessary to obtain the prior permission of the BMA to transfer such Common Shares to any transferee, subject to any applicable general permissions issued by the BMA.
There can be no assurance that
ourthe Common Shares will remain listed on Nasdaq on any tier. Any delisting of
ourthe Common Shares could materially adversely affect
a shareholder's ability to dispose, or obtain quotations as totheir market price and liquidity. If the
market value, of such shares. If our Common Shares are delisted,
we expect ourAPWC expects its Common Shares would be quoted on an over-the-counter market. If this were to occur,
ourAPWC’s shareholders could face significant material adverse consequences, including the need to receive permission from the BMA to transfer
ourthe Common Shares, limited availability of market quotations for
ourthe Common Shares and reduced liquidity for the trading of
ourthe Common Shares. In addition,
weAPWC could experience a decreased ability to issue additional securities and obtain additional financing in the future.
As a foreign private issuer,
we are exempt from a number of rules under the U.S. securities laws and are permitted to filethere is less
publicly available information
with the SECconcerning our Company than
there would be if APWC was a U.S.
public company.
We are
APWC is a “foreign private issuer”, as defined in the SEC’s rules and regulations and, consequently, we areAPWC is not subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, we areAPWC is exempt from certain rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”“Exchange Act”) that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act. In addition, ourAPWC’s senior management and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of ourAPWC’s securities. Moreover, we areAPWC is not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies, and areis not required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act. Accordingly, there is less publicly available information concerning theour Company than there would be if we wereAPWC was a U.S. public company. Future sales of
ourAPWC’s Securities may cause the prevailing market price of
ourthe Common Shares to
decreasedecrease.
There may be future sales or other dilution of
ourAPWC’s equity, which could materially adversely affect the market price of
ourthe Common Shares.
The CompanyAPWC may, from time to time, issue equity securities, including Common Shares or securities that are convertible into or exchangeable for, or that represent the right to receive, Common Shares. The market price of
ourthe Common Shares could decline as a result of issuances of any such equity securities
12
or any such securities that are convertible into or exchangeable for, or that represent the right to receive, Common Shares, or as a result of the perception that such issuances could occur.
The
Marketmarket for
Ourthe Common Shares
May Not Be Liquidmay not be liquid, which could cause volatility and adversely affect our prevailing market price.
Active, liquid trading markets generally result in lower price volatility and more efficient execution of buy and sell orders for investors, compared to less active and less liquid markets.
Thinly-traded equity securities can be more volatile than equity securities for which there is significant trading volume. In addition, APWC’s share price may be volatile and could be subject to fluctuations in response to various factors, most of which are beyond our control. Liquidity of a securities market is often a function of the volume of the underlying shares that are publicly held by unrelated parties.
Approximately 75.417%As of
ourDecember 31, 2021, approximately 75.5% of APWC’s issued and outstanding Common Shares were directly or beneficially owned by PEWC, a Taiwanese company. Following the completion of APWC’s rights offering in February 2022 (as further described in Item 7 in this Annual Report) and as of the date of this Annual Report, approximately 80.9% of APWC’s issued and outstanding Common Shares are directly or beneficially owned by
Pacific Electric Wire & Cable Co., Ltd. (“PEWC”), a Taiwanese company, whichPEWC, with such Common Shares
are subject to
certain restrictions on trading. In addition, although
ourthe Common Shares
are currently
remain traded on the Nasdaq
GlobalCapital Market tier, the trading and demand for
ourthe Common Shares has been
historically limited. As a consequence, shareholders may find that the value of their Common Shares and/or their ability to sell their Common Shares quickly or in substantial amounts may be materially adversely affected by the limited public trading
market. Thinly-traded securities equity can be more volatile than equity securities for which there is significant trading volume. The high and low daily closing prices for ourmarket of the Common
Shares during the past 24 months (April 11, 2018 – April 09,2020) were $2.77 and $0.89, respectively.Shares. In the future,
ourthe Common Shares may experience significant price fluctuations which could materially adversely affect
that the value of your ownership interest in
the Company.APWC.
Our Common Shares have a limited public float and are subject to price volatility, which could adversely affect our prevailing market price.
Given PEWC’s sizable ownership of our outstanding Common Shares, we have a limited public float, which adversely affects trading volumes and liquidity in our Common Shares. We May Not Be Ablehave experienced significant share price and volume fluctuations and could be subject to Resume Paying a Dividend and Any Dividends Paidcontinuing fluctuations in the Future Couldfuture. The trading price of our Common Shares may fluctuate widely due to various factors, including the level of purchases or sales in our Common Shares relative to total volume of trading in our Common Shares, actual or anticipated actions by PEWC, including purchases or sales of our Common Shares by PEWC, actual or anticipated changes in our financial conditions and operating results, changes in our capital structure or liquidity including issuance of additional debt or equity to the public, changes in our dividend policy, news regarding our products or geographic markets, and broad market and industry fluctuations. This volatility in our share price, and limited trading volume in our Common Shares, could adversely affect our business and financing opportunities.
Being the subject of an activist investor campaign could cause us to incur substantial costs, divert management’s attention and resources, and have an adverse effect on our business. We have been in the past, and may continue to be,
Reducedsubject to proposals by activist investors urging us to take certain actions. Responding to activist campaigns is generally costly and time-consuming, as we may need to retain the services of legal, financial and communications advisors to assist APWC in responding to the activist investor’s concerns, the costs of which could negatively impact our future financial results. A campaign could also divert the attention of our directors and officers away from our business and operations, which could adversely impact our business. In addition, perceived uncertainties as to our future direction, strategy or
EliminatedWeleadership arising from an activist campaign could cause our stock price to experience periods of enhanced volatility or harm our ability to raise capital.
APWC may not be able to resume paying a dividend and any dividends paid in the future could be reduced or eliminated, which could adversely affect our prevailing market price.
APWC did not declare or pay any dividends for the years ended December 31, 2022, 2021, 2020 and 2019. There are a dividendnumber of factors that can affect APWC’s ability to pay dividends and there is no guarantee that APWC will pay dividends in 2019. Weany given year or pay any specific amount of dividends. APWC may not be able, or may choose not to reinstate ourits dividend program and pay future dividends, and if reinstated any future dividend could again be eliminated or reduced. The declaration, amount and payment of future dividends are at the discretion of our boardAPWC’s Board of directorsDirectors (the “Board”) and will be dependent on our Company’s future operating results and the cash requirements of our Company’s business. There are a number of factors that can affect our ability to pay dividends and there is no guarantee that we will pay dividends in any given year or pay any specific amount of dividends. In addition, weAPWC will not pay dividends in the event we areit is not allowed to do so under Bermuda law. Furthermore, since APWC is a holding company, nearly all of the assets shown on its consolidated balance sheet are held by its subsidiaries. Accordingly, APWC’s cash flow and its ability to pay dividends are dependent upon distributions from its subsidiaries. The reduction, suspension or elimination of dividends may negatively affect the market price of ourthe Common Shares. Furthermore, since we are
Our holding company structure and potential restrictions on the payment of dividends could materially adversely affect our market price.
APWC is a holding company nearly allwith no direct business operations other than its ownership of the capital stock of its subsidiaries and equity investees. APWC’s principal assets shown on our consolidated balance sheet are held by ourthe equity interests it directly or indirectly holds in its operating subsidiaries. Accordingly, our earnings and cash flow and ourAs a holding company, APWC’s ability to pay dividends and meet its other obligations depends upon the amount of distributions, if any, received from its operating subsidiaries and other holdings and investments. APWC’s operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to APWC, including, but not limited to, as a result of restrictive covenants contained in loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other currency, and other regulatory restrictions. For example, PRC legal restrictions permit payments of dividends by our business entities operating in the PRC only out of their retained earnings, if any, determined in accordance with relevant PRC accounting standards and regulations. Under PRC law, such entities are dependentalso required to set aside a portion of their net income each year to fund certain reserves. These reserves are not distributable as cash dividends. The foregoing restrictions may also affect APWC’s ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary. Distributions may also be limited from time to time by reason of restrictions protective of the rights of minority shareholders of APWC’s subsidiaries and by reason of the current cash requirements of APWC’s operating subsidiaries. Such restrictions on payments involving entities organized in PRC could adversely affect our liquidity, our business results and thus, the price of our Common Shares.
APWC is incorporated in Bermuda, and investors may face limited recourse and enforceability against APWC as well as its directors and officers as compared to corporations incorporated in the U.S.
APWC is incorporated in and organized pursuant to the laws of Bermuda with its principal office located in Taiwan. All of APWC’s directors and officers reside outside the United States and our Company’s material assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon
distributions fromsuch persons or to realize judgements against them in courts of the United States predicated upon civil liabilities under the United States federal securities laws. Even if investors are successful in realizing judgments against such persons in courts of the United States, the laws of Taiwan may render such investors unable to enforce the judgment against our
subsidiaries.Company’s assets or the assets of APWC’s officers and directors. Also, investors may have difficulty in bringing an original action based upon the United States federal securities law against such persons in the Taiwan courts. Additionally, there is doubt as to the enforcement in Bermuda, in original actions or in actions for enforcement of judgments of United States courts, of liabilities predicated upon U.S. federal securities laws. As a result, shareholders may encounter more difficulties in enforcing their rights and protecting their interests in the face of actions taken by management, the Board or controlling shareholders than they would if APWC was organized under the laws of the United States or one of the states therein, or if our Company had material assets located within the United States, or some of the directors and officers resided within the United States.
Control of
the Company RestsAPWC rests with
Majority Shareholder; Controlled Companyits majority shareholder, PEWC, and
Foreign Private Issuer Exemptions; Risks Related to PEWCOur Common Shares currently remain tradedAPWC relies on Nasdaq. However, as the Company has aNasdaq’s controlled company and foreign private issuer exemptions, all of which could materially and adversely affect our corporate governance.
PEWC holds more than fifty percent (50%) shareholder, the Company relies upon50% of our issued and outstanding Common Shares. Accordingly, we are a “controlled company exemption”company” within the meaning of Nasdaq’s corporate governance standards, and may elect to utilize exemptions from certain corporate governance standards, including the requirement (1) that a company have a board of directors comprised of a majority of independent directors in order to be listed on Nasdaq. At present, a majority of the board of directors consist of independent directors, (2) to have a nominating committee that is comprised entirely of independent directors with a written charter addressing the Companycommittee’s purpose and responsibilities and (3) to have a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. We utilize the controlled company exemption for (1) the requirement to have a majority of our Board consist of independent directors, and (2) the requirement to have a nominating committee that is comprised entirely of independent directors with a written charter addressing such committee’s purpose and responsibilities. While we rely on the controlled company exemption for (2), our independent directors oversee our process for identifying director nominees and review the qualifications of such nominees.
At present, a majority of our Board is affiliated with
PEWC. The Company also reliesPEWC, and we rely on Nasdaq’s allowance for foreign private issuers to follow home country practices in lieu of the requirement that listed companies have regularly scheduled meetings at which only independent directors are present (“executive sessions”).
TheNonetheless, our independent directors
of the Company meet periodically
in executive session in their capacity as members of
theour Audit
Committee of the Board of Directors of the Company (“Board of Directors”) without other directors present, but on occasion meet with theCommittee. Our independent auditors
and management occasionally join such meetings in the interest of
the Company present in such executive session, and on occasion meet with members of management present in order to understand more fullycommunicating management’s analysis of the Company’s financial performance and compliance with relevant corporate governance requirements.
Because we have fewer independent directors (i.e. those who do not meet Nasdaq’s independence standards) on our Board than issuers that comply with all of Nasdaq’s corporate governance standards, you are not provided the same level of protection afforded to investors in issuers that comply with all of Nasdaq’s corporate governance standards.
As
ourAPWC’s majority shareholder, PEWC has sufficient votes to control the outcome of any matter presented for a shareholder vote, including the election of each member of
the Board of Directors of the Company.our Board. PEWC may vote its shares in
the CompanyAPWC in the manner that it sees fit. In addition, subject to applicable securities laws, PEWC may sell, convey or encumber all or a portion of its ownership interest in
the CompanyAPWC without regard to the best interests of
theAPWC’s other shareholders
of the Company except to the extent that it is prohibited from engaging in conduct
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oppressive to non-controlling interests under applicable law. The interests of PEWC may conflict with our interests or the interests of our other shareholders. As a result, PEWC may take actions with respect to us or our business that may not be in our or our other shareholders’ best interest.
Due to executive malfeasance at PEWC that was uncovered in 2003, PEWC was delisted from the Taipei Stock Exchange and remains subject to ongoing regulatory review by Taiwan securities regulators as a public company in Taiwan.
Financial or corporate governance issues at PEWC may affect PEWC’s attention to and actions with respect to APWC, including with respect to its performance of its obligations under, or increase uncertainty regarding its ability to perform its obligations under, the Composite Services Agreement between
PEWCAPWC and
the Company.PEWC. (See
“PEWC“Item 3.D. Risk Factors – PEWC may not perform its obligations under the Composite Services Agreement”
below and
see Item 10.3 – “Material“Item 10.C. Material Contracts”
– for a description of the Composite Services Agreement.).
Potential
Conflictconflict of
Certain Officerscertain officers and
DirectorsWe havedirectors could adversely affect our corporate governance.
APWC has three independent directors.
The other sixAs of December 31, 2022, there were five additional members of
theour Board,
all of
Directorswhom are also directors or officers of, or otherwise affiliated with, PEWC,
ourAPWC’s majority shareholder. Certain of
ourAPWC’s officers are also affiliated with PEWC. In each case, they may be subject to potential conflicts of interest. In addition, certain of
ourAPWC’s officers and directors who are also officers and/or directors of PEWC may be subject to conflicts of interest in connection with, for example, pursuing corporate opportunities in which
weour Company and PEWC or one of its affiliates have competing interests, and in the performance by
usAPWC and PEWC of
ourtheir respective obligations under existing agreements, including the Composite Services Agreement. In addition, some of these persons devote time to the business and affairs of PEWC and its affiliates, which could reduce the amount of time available for overseeing or managing our
Company’s business and affairs.
General Risk Factors
Any failure to achieve and maintain effective internal controls could have a material adverse effect on our reputation, business, financial conditions, and results of operations and the market price of
ourthe Common Shares.
Effective internal controls are necessary for us to provide reasonable assurance with respect to our financial reports and to prevent fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. As a result, even effective internal controls are able to provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. Any failure in our internal control
over financial reporting could result in
a material adverse effect on our business and a decline of investor confidence in the reliability of our financial statements, which could materially adversely affect the market price of
our Common Shares.Our auditor’ China affiliate, like other independent registered public accounting firm operating in China, are not permitted to be subject to inspection by Public Company Accounting Oversight Board, and consequently investors are deprived of the benefits of such inspection.
Our auditor, the independent registered public accounting firm that issued the audit report included elsewhere in this annual report, as auditor of companies that are traded publicly in the United States and firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB, are subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor’s China affiliate is located in, and organized under the laws of, the PRC, which is a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities. In May 2013, the PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the China Securities Regulatory Commission (“CSRC”) and the PRC Ministry of Finance, which established a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by PCAOB, the CSRC or the PRC Ministry of Finance in the
14
United States and the PRC, respectively. PCAOB continues to be in discussions with the CSRC, and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firm that are registered with PCAOB and audit Chinese companies that trade on U.S. exchanges.
On December 7, 2018, the SEC and the PCAOB issued a joint statement highlighting continued challenges faced by the U.S. regulators in their oversight of financial statement audits of U.S.-listed companies with significant operations in China. However, it remains unclear what further actions, if any, the SEC and PCAOB will take to address the problem.
This lack of PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting firm. As a result, we and investors in our Common Shares are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditor in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s China affiliate’s audit procedures or quality control procedures as compared to auditor outside of China that are subject to PCAOB inspections, which could cause investors and potential investors in our Common Shares to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.
Holding Company Structure; Potential Restrictions on the Payment of Dividends
We are a holding company with no direct business operations other than our ownership of the capital stock of our subsidiaries and equity investees. Our principal assets are the equity interests we directly or indirectly hold in our operating subsidiaries. As a holding company, our ability to pay dividends and meet our other obligations depends upon the amount of distributions, if any, received from our operating subsidiaries and other holdings and investments. Our operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to us, including, but not limited to, as a result of restrictive covenants contained in loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other currency, and other regulatory restrictions. For example, PRC legal restrictions permit payments of dividends by our business entities in the PRC only out of their retained earnings, if any, determined in accordance with relevant PRC accounting standards and regulations. Under PRC law, such entities are also required to set aside a portion of their net income each year to fund certain reserve funds. These reserves are not distributable as cash dividends. The foregoing restrictions may also affect our ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary. Distributions may also be limited from time to time by reason of restrictions protective of the rights of minority shareholders of our subsidiaries and by reason of the current cash requirements of our operating subsidiaries.
Corporate Matters; Limited Recourse; Limited Enforceability
We are incorporated in and organized pursuant to the laws of Bermuda. In addition, all of our directors and officers reside outside the United States and our material assets are located outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon such persons or to realize judgements against them in courts of the United States predicated upon civil liabilities under the United States federal securities laws. Even if investors are successful in realizing judgments against such persons in courts of the United States, the laws of Taiwan may render such investors unable to enforce the judgment against the Company’s assets or the assets of its officers and directors. Also, investors may have difficulty in bringing an original action based upon the United States federal securities law against such persons in the Taiwan courts. Additionally, there is doubt as to the enforcement in Bermuda, in original actions or in actions for enforcement of judgments of United States courts, of liabilities predicated upon U.S. federal securities laws. As a result, shareholders may encounter more difficulties in enforcing their rights and protecting their interests in the face of actions taken by management, the Board of Directors or controlling shareholders than they would if the Company were organized under the laws of the United States or one of the states therein, or if the Company had material assets located within the United States, or some of the directors and officers resided within the United States.
15
If we lose control of Charoong Thai, Charoong Thai’s financial results would not be consolidated with ours.
As of December 31, 2019, the Company effectively owned 50.93% of the issued and outstanding shares of Charoong Thai Wire and Cable Public Company Limited (“Charoong Thai” or “CTW”). While the Company holds preemptive rights that would permit it to maintain majority ownership of CTW, there may be circumstances under which the Company cannot maintain majority ownership of Charoong Thai. In the event Charoong Thai were to make a further offering of voting securities, or securities convertible into or exchangeable for voting securities, and the Company decided not to, or was not in a position to, fund or finance its participation in the offering, the ownership interest of the Company in Charoong Thai could fall below a level necessary for consolidated treatment, and the Company may lose the controlling interest in Charoong Thai. If that were the case, the accounts of the Charoong Thai group, which includes all of the Company’s Thailand operations, would not be consolidated under IFRS, but instead would be accounted for under the equity method. In such an event, the Company’s accounts would show a significant decrease in revenue and most categories of assets and liabilities, which could materially adversely affect the Company and the value of the Common Shares.
Risks Relating to Our Business
COVID-19 Could Have a Material Adverse Effect on Our Business, Financial Condition and Results of Operations
The recent outbreak in China of the Coronavirus Disease 2019 (“COVID-19”), which has been declared by the World Health Organization to be a “public health emergency of international concern,” has spread across the globe and is impacting worldwide economic activity and financial markets. Our manufacturing and production have been affected by the outbreak of COVID-19. COVID-19 has disrupted our operations and the operations of our suppliers, customers, and other business partners and
International trade policies may
continue to do so for an indefinite period of time, including as a result of travel restrictions and/or business shutdowns. A slowdown in economic activity as a result of COVID-19 can be expected to result in a reduction in demand for our products. The outbreak of COVID-19 has also resulted in a decline in the price of copper, which has had the effect of reducing the market value of our inventory of copper.Due to the measures instituted in China in response to COVID-19, our China production facilities have been operating below normal production levels and our production levels have not yet fully recovered to normal levels. We do not know when our production levels will recover to normal levels.
In addition, the Singapore Government has ordered most businesses to close from April 7, 2020 until June 1, 2020. We have been permitted to continue to operate during this period with reduced on site staff. Since April 7, 2020, approximately half of the employees of our Singapore operation have been working from home while the remaining employees have continued to work on site. We do not know if the Singapore Government will extend (or otherwise alter the terms of) its order requiring most business to close or whether our employees who continue to work on site will continue to be permitted to do so.
In order to protect the employees from COVID-19, the Company had enforced everyone to check the body temperature twice a day, and the employees of Singapore subsidiary took turns to work from home.
This is a rapidly evolving situation and the impact of COVID-19 on the global economy and our business is uncertain at this time. While it is not possible at this time to estimate the impact that COVID-19 could have on worldwide economic activity and our business, the continued spread of COVID-19 and the measures taken by governments, businesses and other organizations in response to COVID-19 are expected to reduce our revenues and could have a material adversenegatively impact our business, financial condition and results of operations.
16
PEWC May not Perform Its Obligations under the Composite Services Agreement
We engage in transactions in the ordinary course of business with PEWC, including the purchase of certain raw materials and the distribution of PEWC products in various countries in the Asia Pacific region. We and PEWC have entered into a composite services agreement dated November 7, 1996, as amended and supplemented (the “Composite Services Agreement”), which contains provisions that define our relationship and the conduct of our respective businesses. The Composite Services Agreement is renewable at our option and is currently in force. Under the Composite Services Agreement, PEWC supplies copper and provides research and development for our products. However, we are unable to ensure that PEWC will not in the future seek to limit, or be unable to perform in whole or in part, the business it conducts with the Company pursuant to the terms of the Composite Services Agreement. Any such limitation or inability to perform the Composite Services Agreement on PEWC’s part could have a material adverse effect on our business, financial condition and results of operations. (See Item 10.3 - Material Contracts – for a description of the Composite Services Agreement.)
Risks Relating to Copper
Copper is the principal raw material we use, accounting for a majority of the cost of sales. Our prevailing practice is to purchase copper at prices based on the average prevailing international spot market prices on the London Metal Exchange (the “LME”) for copper for the one month prior to purchase. The price of copper is affected by numerous factors beyond our control, including global economic and political conditions, supply and demand, inventory levels maintained by suppliers, actions of participants in the commodities markets and currency exchange rates. As with other costs of production, changes in the price of copper may affect the Company’s cost of sales. Whether this has a material impact on our operating margins and financial results depends primarily on the Company’s ability to adjust selling prices to its customers, such that increases and decreases in the price of copper are fully reflected in those selling prices and customers continue to place orders. Most of our sales of manufactured products reflect the cost of copper used to manufacture those products at the time the products are ordered. In the ordinary course of business we maintain inventories of raw materials and finished products reasonably necessary for the conduct of our business. These inventories typically reflect the cost of copper prevailing in the market at the time of purchase. A long-term decrease in the price of copper would require the Company to revalue its inventory at periodic intervals to the then net realizable value, which could be below cost. Copper prices have been subject to considerable volatility, and it is not always possible to manage our copper purchases and inventory so as to neutralize the impact of copper price volatility. In addition, an excessive increase in the price of copper could result in fewer orders from customers and negatively impact the Company. Accordingly, significant volatility in copper prices could have a material adverse effect on our business, financial condition and results of operations.
Restrictive covenants and default provisions in our existing debt agreements may materially restrict our operations as well as adversely affect our liquidity, business, financial condition and results of operations.
As of December 31, 2019, the Company had a total of $287.0 million in credit available to itself, or one or more of its operating subsidiaries. Out of total available credit, $207.9 million was unused and available for borrowing. The weighted average borrowing rate, for all the outstanding loans combined, was 3.72% for 2019. If our business units do not generate sufficient cash flows from operations, we may be unable to make required payments on our debt. Any such failure to make any such payment could have a material adverse effect on our liquidity, business, financial condition and results of operations.
In addition our debt agreements contain restrictive covenants and default provisions. Covenants in the agreements governing our existing debt, and debt we may incur in the future, may materially restrict our operations, including our ability to incur debt, pay dividends, make certain investments and payments, and encumber or dispose of assets. In addition, any global economic deterioration may cause us to incur significant net losses or force us to assume considerable liabilities. We cannot assure you that we will be able to remain in compliance with our financial covenants, which, as a result, may lead to a default. This may thereby restrict our ability to access unutilized credit facilities or the global capital markets to meet our liquidity needs. Furthermore, a default under any agreement by us or our subsidiaries may trigger cross-defaults under our other agreements. In the event of default, we may not be able to cure the default or obtain a waiver on a timely basis. An event of default under any agreement timely governing our existing or future debt, if not cured or waived, could have a material adverse effect on our liquidity, business, financial condition and results of operations.
17
We Face Uncertainties Relating to the Phasing Out of LIBOR
In July 2017, the U.K. Financial Conduct Authority, which regulates the London interbank offered rate (LIBOR), announced that it intends to phase out LIBOR by the end of 2021. Discontinuation of LIBOR and uncertainty as to the nature of such potential changes, alternative reference rates or other reforms may adversely affect the amounts of interest we pay under our debt arrangements and materially adversely affect our business, financial condition and results of operations.
Risks Related to Our Customer Base and Our Geographic Markets
Our sales of products are made primarily to customers that use our products as components in their own products or in construction or infrastructure projects in which they participate. The volume of our sales is significantly correlated with overall economic conditions in the markets in which we operate, including how much our customers invest in their own product manufacturing or project development. Increases or decreases in economic activity and investment in the markets where we operate generally will result in higher or lower sales volume and higher or lower net income for the Company. Any such decrease could have a material adverse effect on our business, financial condition and results of operations.
Business Disruptions Could Affect Our Operating Results
Operations and other business conducted at our plants and other facilities are at risk to uncontrollable natural and climatic events (often referred to as force majeure events). We cannot predict with any certainty whether we will be affected by a force majeure event in the future. Flooding, earthquakes, weather event, fire or other catastrophic events that results in the destruction or disruption of any of our facilities, or our suppliers’ or customers’ facilities, could severely affect our ability to conduct normal business operations and, as a result, our business, financial condition and results of operations could be materially adversely affected.
Our Insurance Coverage Does Not Cover All of Our Business Risks
Our global operations are subject to many risks including errors and omissions, infrastructure disruptions, including large-scale outages or interruptions of service from utilities or telecommunications providers, supply chain interruptions, third-party liabilities and fires or natural disasters. The Company maintains insurance policies covering certain buildings, machinery and equipment against specified amounts of damage or loss caused by fire, flooding, other natural disasters and burglary and theft. The Company does not carry insurance for consequential loss arising from business interruptions or political disturbances and does not carry product liability insurance. In addition, the Company does not have business liability or disruption insurance for its operations in China and the Company does not have coverage for flood damage or business interruption for its operations in Thailand. Consequently, the amount of our insurance coverage may not be adequate to cover all potential claims or liabilities, and we may be forced to bear substantial costs resulting from the lack of adequate insurance. No assurance can be given that we will not incur losses beyond the limits or outside the scope of coverage of our insurance policies. Accordingly, we may be subject to an uninsured or under-insured loss in such situations. Any failure to maintain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition and results of operations.
If we were to lose control of Charoong Thai, our business, financial condition and results of operations could be materially adversely affected
As of December 31, 2019, the Company effectively owned 50.93% of the issued and outstanding shares of Charoong Thai Wire and Cable Public Company Limited (“Charoong Thai” or “CTW”). All of the Company’s operations in Thailand are conducted through Charoong Thai and its subsidiaries and accounted for approximately 50.98% of our total net sales in 2019. While the Company holds preemptive rights that would permit it to maintain majority ownership of CTW, there may be circumstances under which the Company cannot maintain majority ownership of Charoong Thai. In the event Charoong Thai were to make a further offering of voting securities, or securities convertible into or exchangeable for voting securities, and the Company decided not to, or was not in a position to, fund or finance its participation in the offering, the ownership interest of the Company in Charoong Thai
18
could fall below a level necessary for the Company to control Charoong Thai. If the Company were to lose control of Charoon Thai, such loss of control could materially adversely affect the Company’s business, financial condition and results of operations.
Risks Relating to Thailand
A substantial portion of our Thai operations, whose sales accounted for approximately 50.98% of our net sales in 2019, consists of the manufacture of telecommunications and power cables and sales of those products for use in large-scale telecommunications projects and various construction projects in Thailand. As a result, the performance of the Company’s Thai operations are affected by the political situation in Thailand and the general state of the Thai economy. The volume of sales of our products tends to correlate with the general level of economic activity in Thailand. In recent years, the level of government involvement in infrastructure development has tended to track increases or contractions in Thailand’s gross domestic product and the Thai economy has been highly cyclical and volatile, depending for economic growth in substantial part on a number of government initiatives for economic expansion. In addition, the Baht has been volatile and subject to significant fluctuations in relation to the U.S. dollar, which fluctuations can materially adversely affect us. Overall, the construction industry and infrastructure projects have slowed considerably, thereby affecting local sales, placing competitive pressure on prices and prompting the Company to rationalize Thai operations and actively seek overseas export markets. Political tensions remain high in Thailand and political instability in Thailand tends to diminish governmental focus on infrastructure development projects, which can materially adversely impact the volume of sales to (and payment by) our customers who are engaged in large infrastructure projects and, consequently, also materially adversely affect our business, financial condition and results of operations.
Economic Reform Measures in the PRC May Materially Adversely Affect the Company’s Operations or Financial Condition
The PRC government has gradually moved away from a planned economic model and implemented economic reform measures emphasizing decentralization, utilization of market forces in the development of the economy and a high level of management autonomy. The government has decreased its focus on export-oriented activities and placed greater emphasis on building up rural areas in China, including integrating a number of primitive, largely inaccessible agricultural areas into the national economy. However, many of the reforms are unprecedented and may be subject to revision, modification or termination based on the outcomes of the reform efforts and other considerations, including their impact on societal stability. There is not sufficient administrative or judicial precedent to allow the Company to determine with any degree of certainty how the reforms will impact our business in China.
Any Decrease in Real Estate Development and Construction Activities in China May Materially Adversely Affect the Company’s Business, Operations or Financial Condition
Our wire and cable products manufactured and sold in China are used in the commercial and residential real estate industry and in infrastructure development. Therefore, the demand for our wire and cable products is affected by the pace of modernization and the growth of the real estate industry in China, which could in turn be affected by a number of factors, such as the level of governmental investment in infrastructure development, the strength of the commercial and residential real estate markets, the level of disposable income, consumer confidence, unemployment rate, interest rates, credit availability and volatility in the stock markets.
To dampen an over-heated real estate market, the PRC government implemented a series of measures in the real estate market. The real estate market in China may also be negatively affected by the reform of the real estate tax system in respect of levying real estate tax on individually owned real estate which is not used for a business purpose, which has already been implemented by certain local government authorities and may be expanded nationwide sometime in the future.
Any decrease in commercial and residential real estate development and construction activities would adversely affect demand for our manufactured products and could materially adversely affect the Company’s business, results of operations and financial condition.
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The PRC Legal System May Limit the Company’s Remedies
The PRC legal system is a civil law system based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Since the late 1970s, the PRC central government has promulgated a large volume of laws and regulations governing economic matters such as foreign investment, corporate organization and governance, commerce, taxation and trade. In particular, since reforms were first introduced in 1979, the PRC’s legislation and regulations have enhanced the protections provided to various forms of foreign investment in China. However, China has not developed a fully integrated legal system. Recently enacted laws and regulations may not sufficiently cover all aspects of economic activities since they are relatively new, there is a limited volume of published decisions which are nonbinding and the interpretation and enforcement of these laws and regulations is not always uniform, which may limit the remedies available to us in the event of any claims or disputes with third parties. In addition, any litigation in China may be protracted and could result in substantial costs and diversion of resources and management attention. As the PRC legal system continues to evolve, we cannot predict future developments in the PRC legal system, including promulgation of new laws, changes to existing laws or the interpretation and enforcement thereof that may be detrimental to the Company and have a material adverse effect on its business, financial condition and results of operations.
Uncertainties Exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may affect the Company’s Corporate Governance
On January 1, 2020, the PRC Foreign Investment Law (the “Foreign Investment Law”) and the Regulations for Implementation of the Foreign Investment Law (the “Implementation Regulations”), came into effect and replaced the trio of prior laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law, and the Wholly Foreign-invested Enterprise Law, together with their implementation rules. The Foreign Investment Law and the Implementation Regulations embody an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. The Foreign Investment Law and the Implementation Regulations establish the basic framework for the access, promotion, protection and administration of foreign investments in view of investment protection and fair competition.
Since the Foreign Investment Law and the Implementation Regulations are relatively new, uncertainties still exist in relation to its interpretation and implementation. The Foreign Investment Law and the Implementation Regulations may affect our relevant corporate governance practices and increase our compliance costs. For instance, the Foreign Investment Law and the Implementation Regulations requires that foreign-invested enterprises established before the Foreign Investment Law became effective have 5 years to complete the necessary adjustments to their organization form, governance structure and other required matters to comply with the PRC Company Law, the Partnership Enterprise Law and other laws. The PRC Company Law significantly differs from the Sino-foreign Equity Joint Venture Enterprise Law and the Sino-foreign Cooperative Joint Venture Enterprise Law. These differences include, but are not limited to, an enterprise’s highest authority, minimum number of directors, quorum, term of directors, voting mechanisms, profit distributions and equity transfer restrictions. According to the Implementation Regulations, the provisions regarding equity interest transfer and distribution of profits or remaining assets may remain the same as previously provided in the contracts among the joint venture parties of a foreign-invested enterprise. Uncertainties still exist with respect to the specific adjustments foreign-invested enterprises must make. The local branch of the State Administration for Market Regulation of the PRC (the “SAMR”) may, at its discretion, require our PRC subsidiaries to make necessary adjustments to their articles of association and other filing documents to comply with the PRC Company Law and the Partnership Enterprise Law.
In addition, the Foreign Investment Law and the Implementation Regulations impose information reporting requirements on foreign investors and foreign-invested enterprises. Any foreign investors or foreign-invested enterprises found to be non-compliant with these reporting obligations may be subject to fines or administrative liabilities.
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The Foreign Investment Law does not address intercompany loans or the registration of profits of foreign-invested enterprises. It is not known whether these matters will be addressed by additional laws or regulations promulgated pursuant to the Foreign Investment Law. The Foreign Investment Law and the Implementation Regulations could be interpreted and implemented in a manner that could have a material adverse effect on the Company’s business, financial condition and results of operations.
PRC Regulations of Loans to and Direct Investment in PRC Entities by Offshore Holding Companies may delay or prevent us from making Loans or additional Capital Contributions to our PRC Subsidiaries, which could materially adversely affect our ability to fund and expand our business
We conduct substantial business operations in China. We may make loans or capital contributions to our PRC subsidiaries. Loans or capital contributions by APWC or any of our offshore subsidiaries to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC law, may be subject to PRC regulations and/or foreign exchange loan registrations. Such loans to any of our PRC subsidiaries to finance their activities generally cannot exceed statutory limits and must be filed with the State Administration of Foreign Exchange (the “SAFE”) through the online filing system of SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested enterprise is the greater of (i) the difference between the amount of total investment and the amount of registered capital of such foreign-invested enterprise and (ii) 2.5 times the amount of such foreign-invested enterprise’s net assets. We may also decide to finance our PRC subsidiaries by means of capital contributions, in which case the PRC subsidiary is required to register the details of the capital contribution with the SAMR and submit a report on the capital contribution via the online enterprise registration system to the PRC Ministry of Commerce.
According to the Circular of the SAFE on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign Invested Enterprises promulgated on March 30, 2015 and the Circular of the SAFE on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts promulgated on June 9, 2016, the RMB capital converted from foreign exchange capital, foreign debt funds, and proceeds remitted from foreign listings of a foreign-invested enterprise may not be directly or indirectly used for purposes beyond the business scope of such foreign-invested enterprise. On October 23, 2019, the SAFE issued the Circular on Further Promoting Cross-border Trade and Investment Facilitation, or SAFE Circular 28. Among other things, SAFE Circular 28 relaxes prior restrictions and allows foreign-invested enterprises that do not have equity investments in their approved business scope to use their capital obtained from foreign exchange settlement to make domestic equity investments as long as the investments are real and in compliance with the foreign investment-related laws and regulations.
In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, including the SAFE circulars referred to above, we cannot assure that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans or capital contributions by APWC to our PRC subsidiaries and conversion of such loans or capital contributions into RMB. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially adversely affect the Company’s business, financial condition and results of operations.
Political or Social Instability, Health Epidemics and Environmental Issues in the PRC May Materially Adversely Affect the Company’s Operations or Financial Condition
Political or social instability in China could also materially adversely affect our business operations or financial condition. Our corporate headquarters are located in Taipei, Taiwan. Any escalation in political tensions between the PRC and the government of Taiwan could materially adversely impact our ability to manage our operations in the PRC efficiently or without third party interference. The PRC government has long advocated a one-China policy with regard to the Republic of China. Any overtly aggressive actions by the PRC towards Taiwan could have a materially destabilizing impact on Taiwan generally, and on our business in particular. In addition, adverse public health epidemics or pandemics in China could not only interfere with our ability to operate our PRC subsidiaries, but could also affect the country’s overall economic growth, which could in turn affect the sales of our products in China. Growing environmental awareness and concern over the deterioration of the quality of the environment in China, including air and water quality, could dampen domestic industrial growth and reduce foreign investor interest in PRC investment.
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PRC State-Owned Enterprises (“SOEs”) May Have Competitive Advantages that We May Not Be Able to Overcome
Much of the PRC's manufacturing output is still conducted through SOEs, which are often subsidized by the government such that they are protected against the challenges of market forces confronting private enterprises. As a consequence, it can become untenable for private enterprises in competition with SOEs to conduct profitable operations when the SOEs are being subsidized by the government and may operate in a loss position for an extended period. APWC’s ’s business, financial condition and results of operations may be materially adversely affected in the event it must compete with such SOEs.
Inflation in the PRC May Materially Adversely Affect the Company’s Business, Results of Operations and Financial Condition
The rapid growth of the PRC economy has historically resulted in high levels of inflation. If inflation is significant, our costs would likely increase, and there can be no assurance that we would be able to increase our prices to an extent that would offset the increase in our expenses.
PRC Power Shortages May Materially Adversely Affect Our Operations or Financial Condition
We consume substantial amounts of electricity in our manufacturing processes at our production facilities in China. Certain parts of China have been subject to power shortages in recent years. We have experienced a number of power shortages at our production facilities in China to date, particularly in Shenzhen where numerous clusters of factories are situated. We are sometimes given advance notice of power shortages, but often power shortages or outages occur unexpectedly for various periods of time. We currently have a backup power system at certain of our production facilities in China. However, there can be no assurance that in the future our backup power system will be completely effective in the event of a power shortage, particularly if that power shortage is over a sustained period of time and/or we are not given advance notice thereof. Any power shortage, brownout or blackout for a significant period of time may disrupt our manufacturing, and as a result, could have a material adverse impact on our business, financial condition and results of operations.
Dividends Payable by Our PRC Subsidiaries to Their Respective Offshore Investors Are Subject to PRC Withholding Taxes
Under Chinese tax law and related regulations, dividends, interests, rent or royalties payable by a foreign-invested enterprise, such as our PRC subsidiaries, to any of its foreign non-resident enterprise investors, and proceeds from any such foreign enterprise investor’s disposition of assets (after deducting the net value of such assets) are subject to a 10% withholding tax, unless the foreign enterprise investor’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax. Undistributed profits earned by foreign-invested enterprises prior to January 1, 2008 are exempted from any withholding tax. Bermuda, where APWC, the ultimate owner of our PRC subsidiaries and investments, is incorporated, does not have such a tax treaty with China. Hong Kong, where Crown Century Holdings Limited (“CCH HK”), the sole shareholder in Pacific Electric Wire and Cable (Shenzhen) (“PEWSC”), is incorporated, has a tax arrangement with China that currently provides for a 5% withholding tax on dividends subject to certain conditions and requirements, such as the requirement that the Hong Kong resident enterprise owns at least 25% of the PRC enterprise distributing the dividend at all times within the 12-month period immediately preceding the distribution of dividends and be a “beneficial owner” of the dividends. However, if CCH HK is not considered to be the beneficial owner of the dividends paid to it by PEWSC under the Announcement of the State Administration of Taxation on Issues Relating to “Beneficial Owner” in Tax Treaties promulgated on February 3, 2018, such dividends would be subject to withholding tax at a rate of 10%. Consequently, if our PRC subsidiaries declare a dividend or distribution and distribute profits earned after January 1, 2008 to their respective offshore investors, such payments will be subject to withholding tax.
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Labor Law Legislation in the PRC May Materially Adversely Affect the Company’s Operations or Financial Condition
The PRC Labor Contract Law formalizes workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of labor unions. Considered one of the strictest labor laws in the world, this law requires, among other things, an employer to conclude an “open-ended employment contract” with any employee who either has worked for the employer for ten years or more or has had two consecutive fixed-term contracts. An “open-ended employment contract” is in effect a lifetime, permanent contract, which is terminable only in specified circumstances, such as a material breach of the employer’s rules and regulations, or for a serious dereliction of duty. Such employment contracts with qualifying workers would not be terminable if, for example, the Company determined to downsize its workforce in the event of an economic downturn. Under the Labor Contract Law, downsizing by 10% or more (or more than 20 persons) may occur only under specified circumstances, such as a restructuring undertaken pursuant to the PRC Enterprise Bankruptcy Law, or where a company suffers serious difficulties in production and/or business operations. Any of the Company’s staff employed to work exclusively within the PRC are covered by the Labor Contract Law and thus, the Company’s ability to adjust the size of its operations when necessary in periods of recession or less severe economic downturns is limited. Accordingly, if the Company faces future periods of decline in business activity, the Labor Contract Law can be expected to exacerbate the adverse effect of the economic environment on the Company’s business, results of operations and financial condition. Additionally, the Labor Contract Law has affected the labor costs of our customers, which could adversely affect such customers’ business and result in a corresponding decrease in their purchase of our products. Any of the foregoing could have a material adverse impact on the Company’s business, financial condition and results of operations.
In addition, under the PRC Social Insurance Law and the Regulation on the Administration of Housing Accumulation Funds, an employer is required to pay various statutory employee benefits, including social insurance (namely pension insurance, work-related injury insurance, medical insurance, unemployment insurance, and maternity insurance) and housing funds to relevant government authorities for the benefit of its employees. If we fail to make adequate social insurance and housing fund contributions, we may be subject to late payment fees, fines and/or other penalties, and our business, financial condition and results of operations could be materially adversely affected.
Risks Relating to Our Exposure to Foreign Exchange Fluctuations
Although our reporting currency is the U.S. dollar, the functional currency of our Thailand region, which accounted for 50.98% of sales in 2019, is the Thai Baht. The functional currencies of our ROW region, which accounted for 26.38% of sales in 2019, are the Australia dollar and the Singapore dollar. The functional currencies for our North Asia operations, which, in total accounted for 22.64% of sales in 2019, are divided into two groups: (i) Shandong Pacific Rubber Cable Company, Ltd. (“SPRC”), equity investee with 25% equity owned by APWC, (accounting under equity method), Shanghai Asia Pacific Electric Co., Ltd. (“Shanghai Yayang”), and PEWSC, whose functional currency is the Renminbi, and (ii) CCH HK, whose functional currency is the U.S. dollar. Accordingly, the functional currency accounts of these operations are all translated into U.S. dollars utilizing the reporting date exchange rate for balance sheet accounts, and an average exchange rate for the year for the income statement accounts, for reporting purposes. Any devaluation of the Baht, the Australian dollar, the Singapore dollar, or the Renminbi against the U.S. dollar would adversely affect our financial performance, as measured in U.S. dollars.
Fluctuations in foreign exchange rates affect our results of operations. Our principal operations and properties are located in the three regions that constitute our business segments, namely the North Asia, Thailand and Rest of the World (“ROW”) regions. A substantial portion of our aggregate revenues is denominated in the following currencies: Renminbi, Baht, Australian dollars and Singapore dollars. Significant proportions of raw materials are in U.S. dollars, and consequently are directly affected by foreign currencies and exchange rates. Ongoing equipment upgrade and maintenance programs are also significantly impacted by foreign exchange rates. Any devaluation of the Baht, the Australian dollar, the Singapore dollar or the Renminbi against the U.S. dollar would increase the effective cost of foreign manufacturing equipment and the amount of our foreign currency denominated expenses and liabilities. This would have an adverse impact on our operations. An increase in U.S dollar borrowing costs and any increase in the strength of the US$ in foreign exchange markets (which could also increase borrowing rates) could materially adversely affect our business in the markets where we have operating plants (Thailand, China, Singapore and Australia). Our financial statements for our operating subsidiaries in those markets are reported and denominated in local currencies (referred to as our “functional currencies”) and, when translated into U.S. dollars (our reporting currency), these operating subsidiaries suffer a decrease in reported
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revenue and operating profits by reason of increased U.S. dollar borrowing costs or an increase in the value of the US$ as against one or more of our functional currencies. Moreover, our purchases of materials are based on U.S. dollar quotations, which mean that our operating subsidiaries have to pay more in local currency in order to meet their trade payable obligations in the case of such an increase in the value of the U.S. dollar. Consequently, adverse movements in exchange rates could have a material adverse effect on our business, financial condition and results of operations.
In addition to our operating revenues being generated in local currencies, a portion of our investment properties and financial instruments are also denominated in currencies other than the U.S. dollar. Accordingly, our investment results will be subject to possible currency rate fluctuations as well as the volatility of overseas capital markets. Our results of operations may be materially impacted by those fluctuations and volatility.
Competition
The wire and cable industry in the Asia Pacific region is highly competitive, and if we fail to successfully invest in and maintain product development, productivity improvements and customer service and support, sales of our products could be materially adversely affected. Our competitors include a large number of independent domestic and foreign suppliers. Certain competitors in each of our markets have substantially greater manufacturing, sales, research and financial resources than we do. We and other wire and cable producers compete primarily on the basis of product quality and performance, reliability of supply, customer service, and price. To the extent that one or more of our competitors are more successful with respect to the primary competitive factors, our business could be materially adversely affected. In addition, the Company’s business could be materially adversely impacted if low margin wire and cable manufacturers in China enter into the markets where we operate. Certain of our products are made to common specifications and may be interchangeable with the products of certain of our competitors. Since customers could potentially substitute our products with those of our competitors, customer loyalty is an important pillar of our business’s competitive position.
In addition, in order to remain competitive in the industry, the Company must periodically make substantial investments in capital equipment to ensure that our production processes are and remain state-of-the-art. Capital expenditures are not always predictable, as they are often driven by customer requirements for enhanced products. We cannot guarantee we will have the available capital to make such capital expenditures when required, which could materially adversely affect our business, financial condition and results of operations.
International Trade Policies May Negatively Impact Our Business, Results of Operations and Financial Condition
Government policies on international trade and investment such as import quotas, tariffs, and capital controls, whether adopted by individual governments or addressed by regional trade blocs, can affect the demand for our products and services and those of our customers and impact the competitive position of our products or services or those of our customers. For example, the business of our customers in China may be adversely impacted by the continuing trade friction between the United States and China. We cannot predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business. The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, and our suppliers, which in turn could materially adversely impact our business, financial condition and results of operations.
Alternative Transmission Technologies
Our
telecommunications cableinternational business
isoperations subject
us to
competition from other transmission technologies, principally wireless-based technologies. Wireless telecommunications businesses have sometimes made substantial inroads in early emerging markets where sufficient fundingcertain risks which may
not then be available to install the infrastructure necessary for market-wide fixed line telecommunications. In addition, the ease of use of wireless telecommunications may make that medium an attractive alternative in circumstances where access to fixed line telecommunications is limited. These technologies present significant competition in the markets in which we conduct or plan to conduct businessmaterially and
no assurance can be given that the future development and use of such alternative technologies will not materially adversely affect our business
financial condition and
results of operations.
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We Operate in Highly Concentrated Markets
Failure to properly execute customer projects in markets where a small number of customers are responsible for a large portion our sales could materially adversely impact our ability to obtain similar contracts from other customers in that market and may result in material financial penalties. In certain of our markets, sales of manufactured products are highly concentrated in large state-controlled entities or large private infrastructure developers. As those markets are often highly concentrated, the loss of individual customers in such markets could have a material adverse impact on our position in that market as a whole and could materially adversely affect our business, financial condition and results of operations.
Risks Associated With Required Productivity Increases
Our business strategy includes a focus on improving our financial results through increased efficiency and productivity. In the event we are not able to implement measures to increase efficiencies and productivity, we may be limited in achieving improved financial results or our financial results may worsen. Moreover, productivity increases are linked to capacity utilization rates. A drop in the utilization rate of our manufacturing capacity would adversely impact productivity and could have a material adverse effect on our business, financial condition and results of operations.
Employees’ Unions
Some of the operating subsidiaries of the Company have a large number of employees that are members of employees’ unions. Failure to successfully negotiate and/or renew collective agreements, strikes, or other labor disputes could result in a disruption of our operations. Any such labor dispute could lead to a disruption of our operations, hindering our ability to serve our customers, and could have a material adverse effect on the Company’s and could materially adversely affect our business, financial condition and results of operations.
Information Systems
The Company's subsidiaries each have their respective information systems to support the operation of such subsidiary. Some of the Company’s subsidiaries have implemented systems upon which they place great reliance for efficient operations. Most business operations, including sales, procurement, production, inventory and accounting, are processed by our internal information systems. While our operating subsidiaries vary in the degree of reliance that they place on their information systems, they all may be materially adversely affected by the failure or breakdown of their information system. A disruption of a subsidiary’s information system could materially adversely affect the Company’s business, financial condition and results of operations. Among other things, financial data may be corrupted and financial information may not be accurately reported or presented in a timely manner, which could impair the Company’s ability to timely file periodic or annual reports with the SEC or timely disseminate material information to shareholders. A system failure could also result in a decrease in customer satisfaction because of a delay in the delivery of goods or order processing. Intellectual property, company reputation, and competitive advantages could also be harmed with an information system failure.
Increased reliance on information systems requires the implementation of IT security measures to protect networks, computers, programs and data from attack, damage or unauthorized access and ensure the confidentiality, availability and integrity of Company data. If the Company’s IT security measures are compromised or otherwise fail to protect systems, networks and data, or if an event of force majeure occurs and the Company’s disaster recovery plan does not operating effectively, the Company’s business may be disrupted and stand to lose assets, reputation and business, and potentially face regulatory fines and litigation as well as the cost of remediation, which could materially adversely impact the Company’s business, financial condition and results of operations.
Cyber Security Breaches Could Have A Material Adverse Effect on Our Business And Operations
Intense competition in the wire and cable sector renders APWC vulnerable to theft and copying of design specifications. While the Company relies upon its majority shareholder, PEWC, for much of its research and development, APWC’s products are designed precisely to meet customer specifications for the applications for which they are intended. Our cybersecurity systems are intended to protect not only our manufacturing and assembling methodologies, but also the proprietary data and operating systems of our customers and of third-party
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licensors who may make their intellectual property available for use by us or by our customers in the development of our customers’ end product.
Cybersecurity risks create potential for a material adverse impact on the Company’s business, financial condition and result of operations due to, but not limited to, losing intellectual property, implementing reactive measures, managing litigation or investigations, addressing reputational harm, or losing a competitive advantage. Mitigating these risks requires ongoing management oversight to ensure that sufficient controls and procedures are in place for appropriate persons to receive pertinent cybersecurity risk information to take appropriate action. The Company cannot offer any assurances that those controls and procedures will be sufficient to protect against cybersecurity risks.
APWC employs safeguards, both technological and contractual, in order to protect its proprietary interests and those of its customers and third-party licensors, including, without limitation, certain insurance against theft and risk of loss, and in order to preserve the APWC’s reputation as a reliable manufacturer and distributor of finished goods for which good and clean title may pass. However, we cannot guarantee that such safeguards will protect the Company from all types of cybersecurity threats which could result in a material adverse effect on the Company’s business, financial condition and results of operations.
Employees and Personnel
If we fail to retain our key employees and attract qualified personnel, our business may be harmed. The loss of any of our executive officers or other key employees could have a material adverse effect on our business, financial condition and results of operations. The loss of executive officers or key employees could impair customer relationships and result in the loss of vital industry knowledge, expertise, and experience. There is also a risk of losing key employees to our competitors, which could pose a possible risk of the theft of trade secrets, with competitors then gaining valuable information about our manufacturing process. The Company’s future success depends on its continued ability to attract and retain talented and qualified personnel.
Impairment Charges
In prior years, we have on occasion recognized impairment charges on certain property, plant and equipment due to lack of profitability. We recognized impairment charges of $546 thousand for 2019.
An impairment charge may be incurred for various reasons including, but not limited to, strategic decisions made in response to changes in economic and competitive conditions, the impact of the economic environment on our business or a material adverse change in any material relationships with our clients. If we recognize significant impairment charges, our results of operations may be materially adversely affected.
Environmental Liabilities
We are subject to certain environmental protection laws and regulations governing our operations and the use, handling, disposal and remediation of hazardous substances used by us. We could incur environmental liability from our manufacturing activities in the event of a release or discharge by us of a hazardous substance. Under certain environmental laws, we could be held responsible for the remediation of any hazardous substance contamination at our facilities and at third party waste disposal sites and could also be held liable for any consequences arising out of human exposure to such substances or other environmental damage. There can be no assurance that the costs of complying with environmental, health and safety laws and requirements arising from our current operations, or the liabilities arising from past releases of, or exposure to, hazardous substances, will not result in future liabilities incurred, or expenditures payable, by us that would materially adversely affect our business, financial condition and results of operations.
International Business Risks
We are subject to risks specific to our international business operations, including: the risk of supply disruption; production disruption or other disruption arising from events of force majeure, such as severe weather and climatic events; the outbreak of highly infectious or communicable diseases such as COVID-19, Severe Acute Respiratory Syndrome, swine influenza or pandemics of a similar nature; the risk of potential conflict and further instability in the relationship between Taiwan and the PRC; risks related to national and international political instability, such as disruptions to business activities and investment arising out of
the political unrest and turmoil in Thailand; risks related to
the recent global economic turbulence and adverse economic developments in
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a number of Asian markets; risks associated with the possible interest rate increases, which could result in increases in the cost of borrowing and reduced liquidity for us and our customers; risks related to changes in governmental or private sector policies and priorities with respect to infrastructure investment and development; unpredictable consequences on the economic conditions in the U.S. and the rest of the world arising from terrorist attacks, and other military or security operations; unexpected changes in regulatory requirements or legal uncertainties regarding tax regimes; tariffs and other trade barriers, including current and future import and export restrictions; difficulties in staffing and managing international operations in countries such as Australia, Singapore, the PRC, Thailand and Taiwan;
risks that changes in foreign currency exchange rates will make our products comparatively more expensive; limited ability to enforce agreements and other rights in foreign countries; changes in labor conditions; longer payment cycles and greater difficulty in collecting accounts receivable; burdens and costs of compliance with a variety of foreign laws; limitation on imports or exports and the possible expropriation of private enterprises; and reversal of the current policies (including favorable tax and lending policies) encouraging foreign investment or foreign trade by our host countries.
ITEM 4:
| INFORMATION ON THE COMPANY
|
| A.
| History and Development of the Company
|
Climate change, or legal, regulatory or market measures to address climate change, may materially adversely affect our Company’s financial condition and business operations.Climate change resulting from increased concentrations of greenhouse gases in the atmosphere could present risks to our Company’s future operations due to natural disasters and extreme weather conditions, such as hurricanes, tornadoes, earthquakes, wildfires, droughts or flooding. Such extreme weather conditions could pose physical risks to our Company’s suppliers and facilities, disrupt operation of our Company’s supply chain, including availability of raw materials and transportation, and impact operational costs.
Concern over climate change has resulted in both existing and pending legal and regulatory requirements designed to mitigate its effects. Our Company is therefore subject to environmental, health and safety regulations in connection with its global business operations, including but not limited to: regulations related to the development, manufacture, shipping and use of its products, handling, discharge, recycling and disposal of hazardous materials used in its products or in producing its products, and the operation of its facilities. Such measures subject us to additional costs and restrictions and require operating and capital expenditures, which could impact our Company’s business, financial condition, results of operations and cash flows. For example, any pollutants and waste generated during our Company’s manufacturing process need to be disposed of and/or mitigated in compliance with applicable laws and regulations. Additionally, a lack of consistent climate legislation across the regions in which we operate may create economic and regulatory uncertainty. Any failure or inability to comply with existing or future environmental, health and safety regulations, including those relating to climate change, could result in significant remediation or other legal liabilities, the imposition of penalties and fines, restrictions on the development, manufacture, sale, shipping or use of certain of its products and limitations on the operation of its facilities.
In addition to regulatory compliance, growing customer sustainability requirements and shareholder sentiment in respect of environmental and sustainability standards could cause our Company to incur substantial expense from time to time to alter its manufacturing, operations or equipment designs to meet these regulatory and sustainability requirements as well as investor expectations. Moreover, we may not be able to timely meet these requirements due to the required level of capital investment or technological advancement. Any failure to comply with these regulations, or meet these customer requirements or sustainability targets, could adversely impact the demand for our Company’s products and subject our business to significant costs and liabilities and reputational risks that could adversely affect our business, financial condition and results of operations.
Inflationary price pressures of raw materials or other inputs used by our business could negatively impact the profitability of our business.
Increases in the price of commodities, raw materials, utilities, labor or other inputs that our operations or our Company’s suppliers use in manufacturing and supplying products, components and parts, along with logistics and other related costs, may lead to higher costs for our Company’s products and services. In addition, new laws or regulations adopted in response to climate change could increase energy and transportation costs, as well as the costs of certain raw materials and components. Any increase in the cost of inputs to our Company’s production could lead to higher costs for our Company’s products and could negatively impact our Company’s operating results, future profitability and ability to successfully deliver on our Company’s strategy.
ITEM 4: INFORMATION ON THE COMPANY
4.A. History and Development of the Company
Asia Pacific Wire & Cable Corporation Limited was
formedincorporated on September 19, 1996 as a Bermuda exempted company limited by shares and incorporated under the Bermuda Companies Act 1981, as amended (the “Companies Act”). The address of
the Company’sAPWC’s principal
place of businessoffice is Room B, 15th Floor, No. 77, Sec. 2, Dunhua South Road, Taipei, 106, Taiwan, and its telephone number is
+(886)+886 2-2712-2558.
Our Company’s registered agent (and agent for service of process) in the United States is Puglisi & Associates,
locatedwith an address at 850 Library Avenue, Suite 204, Newark, Delaware
19711, is the Company’s agent for service of process in the United States.The Company is principally engaged in the manufacture and distribution of telecommunications (primarily copper, but also fiber optic) and power cable, enameled wire and electronic wire products in the Asia Pacific region, primarily in Thailand, China, Singapore and Australia. The Company also provides project engineering services to certain customers.
Shanghai Yayang, which had previously produced enameled wires, ceased production by end of October of 2019 and has been restructured as a trading company in Shanghai that supplies mainly transformer, motor and coil manufacturers in the eastern part of China, locally in the Shanghai market and to certain Taiwanese-based manufacturers.
19711.
Principal capital expenditures consisted of purchases of property, plant and equipment totaling $5.4$3.7 million in 2019, $4.42022, $8.5 million in 20182021 and $4.9$14.5 million in 2017,2020, mostly for the purchase of production machinery and equipment forin Thailand.
In 2023, we expect our business’ principal capital expenditures to include the
CTW group in Thailand.In 2017, Ningbo Pacific Cable Co., Ltd. (“Ningbo” or “NPC”), sold real estate and land use rights, which yielded $4.4 million in operating profit.
The Company is currently planning to launch the following CAPEX projects: to purchase of new equipment to expand the production capacity in ChinaAustralia and Thailand,Thailand. We expect total capital expenditures in 2023 to build new factory buildings in Thailandbe $0.7 million based on current assumptions, although this number could change based on market conditions and other relevant factors. Our Company intends to purchase a new warehouse in Australia.
Thepay for these expenditures with funds generated from its operations.
Our Company’s present plans
also include
seeking to developthe development of an alternative energy business in Taiwan by availing itself of new tax-driven development incentives provided by the Taiwan government for the expansion of “green” energy alternatives. This project remains at a development-stage and has not generated any revenues to date.
Please see Note 29 (Subsequent Events) to the consolidated financial statements referenced in Item 18 hereof for information on recent material events, which Note contains information regarding recent development in respect of the risk of the delisting of our Common Shares from Nasdaq and in respect of the material adverse effects of COVID-19 on the Company, its business, operations, financial condition, employees and customers.
Our website is located at www.apwcc.com. The information contained or linked to on our website is not included in, or incorporated by reference into, this Annual Report on Form 20-F. Our filings with the SEC, including reports, proxy and information statements, and other information regarding us that is filed electronically with the SEC are available on the SEC’s
websiteswebsite at www.sec.gov.
27
The Company
4.B. Business Overview
Our Company’s Operations and Principal Activities
APWC is a holding company
(incorporated in Bermuda with principal executive offices in Taiwan) that operates its business through operating
subsidiaries. Through our subsidiaries,
and associates, principally located in Thailand, China, Singapore and Australia.Theour Company is principally engaged in the manufacture and distribution of telecommunications (primarily copper, but also fiber optic) andenameled wire, power cable, enameled wire and electronic wiretelecommunications products in Thailand, Singapore, Australia, PRC, Hong Kong and certain other markets in the Asia Pacific region, primarily in Thailand, China, Singapore and Australia. Theregion. Our Company also provides project engineering services in supply, delivery and installation of power cable (“SDI”). Our Company’s major customers include appliance component manufacturers, electrical contracting firms, state owned entities, wire and cable dealers and factories.
APWC has no direct business operations other than its direct and indirect ownership of the capital stock of its subsidiaries and equity investee holdings. Although APWC has not paid a dividend to
certain customers.The Company’s present plans include seekingholders of our Common Shares since 2019, APWC’s ability to develop an alternative energypay any dividends in the future, as well as to meet its other obligations and to fund operations, depends upon the amount of distributions, if any, received from its direct and indirect operating subsidiaries and other holdings and investments. APWC’s operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to APWC, including as a result of restrictive covenants contained in loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other hard currency and other regulatory restrictions applicable to the countries in which our subsidiaries are formed and conduct their business. For further discussion of the risks created by these restrictions and limitations, see “Risk Factors-Risks Related to our Financial Activities” and “Risk Factors-Risks Relating to the Regions in which We Operate.”
Reporting Segments and Geographic Regions
We operate our business in Taiwanthree reporting segments: Thailand, North Asia, and ROW. Our Company’s power cable and telecommunications cable products are primarily sold in the domestic markets of the countries where they are manufactured, whereas a portion of the enameled wires manufactured by availing itself of new tax-driven development incentives provided by the Taiwan governmentour Company in Thailand are exported, primarily
to customers throughout Southeast Asia. The following table sets forth our Company’s sales revenues for the expansionperiods indicated in its three reporting segments for its principal product lines.
| | | | | | | | | | | | | | | | | | | | | | | |
Year ended
December 31, 2022 | North Asia | | Thailand | | ROW | | Total segments Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Revenue from external customers | | | | | | | |
| Power | 92 | | | 46,340 | | | 135,739 | | | 182,171 | |
| Enamel | 76,002 | | | 102,122 | | | — | | | 178,124 | |
| SDI | 1,209 | | | — | | | 44,722 | | | 45,931 | |
| Others* | 26 | | | 23,379 | | | 4,262 | | | 27,667 | |
| 77,329 | | | 171,841 | | | 184,723 | | | 433,893 | |
*includes revenues from fabrication service contracts and the sale of “green” energy alternatives. This project remains at a development-stageother wire and has not generated anycable products.
| | | | | | | | | | | | | | | | | | | | | | | |
Year ended
December 31, 2021 | North Asia | | Thailand | | ROW | | Total segments Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Revenue from external customers | | | | | | | |
| Power | — | | | 63,629 | | | 127,891 | | | 191,520 | |
| Enamel | 107,027 | | | 105,749 | | | — | | | 212,776 | |
| SDI | — | | | — | | | 39,476 | | | 39,476 | |
| Others* | 5 | | | 28,401 | | | 4,481 | | | 32,887 | |
| 107,032 | | | 197,779 | | | 171,848 | | | 476,659 | |
*includes revenues from fabrication service contracts and the sale of other wire and cable products.
| | | | | | | | | | | | | | | | | | | | | | | |
Year ended
December 31, 2020 | North Asia | | Thailand | | ROW | | Total segments Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Revenue from external customers | | | | | | | |
| Power | — | | | 48,851 | | | 78,779 | | | 127,630 | |
| Enamel | 73,179 | | | 57,971 | | | — | | | 131,150 | |
| Fabrication | — | | | 33,101 | | | — | | | 33,101 | |
| Others* | 20 | | | 3,724 | | | 17,939 | | | 21,683 | |
| 73,199 | | | 143,647 | | | 96,718 | | | 313,564 | |
*include revenues from SDI service contracts (which amounted to date.US$15.6 million in 2020), and the sale of other wire and cable products.
The following chart
showssets forth the organizational structure,
of the Company as of December 31,
20192022, of APWC and its principal
operating subsidiaries,
including affiliate ownerships, and
indicates the percentage
of ownership
interest andor voting power
inof each
case.entity. The location of the headquarters of each company is indicated in parentheses
underabove the company’s name (“T” for Thailand, “C” for China or Hong Kong, “S” for Singapore and “A” for Australia).
In Thailand,
RegionThe Company’s Thai operations are conducted through APWC has the following subsidiaries:
•Charoong Thai Wire & Cable Public Co. Ltd. (“Charoong Thai”), a public company listed in Thailand that is majority owned by APWC.
•Charoong Thai owns three principal subsidiaries in Thailand, namely Siam Pacific Electric Wire & Cable Co. Ltd. (“Siam Pacific”), Double D Cable CompanyCo. Ltd. (“DD”), and Siam Fiber Optics Co. Ltd. (“Siam Fiber Optics”). Charoong Thai
Our Company produces and
Siam Pacific are the Company’s principal entitiessells enameled wires, power cables, and telecommunication cables in Thailand.
28
Charoong Thai is a publicly-traded Thai corporation,one of the shares of which are listed on the Stock Exchange of Thailand (“SET”). It manufactures aluminumleading cable manufacturers in Thailand. Our distribution channels include both direct sales to state owned entities and copper electric wire, medium and high voltage power cables and telecommunications cables. It has subsidiaries and affiliatesprivate sector participants in the businesses of optic fiber cable manufacturinginfrastructure sector, and telecommunication and network services. Charoong Thai was established insales to agents for state owned entities. Sales within the Thailand in 1967 as a limited public company. As of December 31, 2019,region are made directly by the Company effectively owned 50.93%sales department of the issuedAPWC operating subsidiaries in accordance with terms and outstanding sharespricing set by the local subsidiaries. The major customers of Charoong Thai. The Company’s present intention is to maintain majority ownership ofour Company include clients working with the voting securities of Charoong Thai. The board of directors of Charoong Thai may authorize the issuance of additional shares of common stock of Charoong Thai. The Company has preemptive rights to purchasegovernment and its pro rata share of any additional authorized shares, less amounts reserved for directors, officers or employees. contractors.
In
the event the board of Charoong Thai decides to cause it to issue additional shares, the Company may decide not to exercise its preemptive rights, in which case the Company’s interest may be diluted.Siam Pacific was established in 1988 as a joint venture between PEWC and Italian-Thai Development Plc. Siam Pacific is now a 100%-owned subsidiary of Charoong Thai and focuses on the manufacture of telecommunications cables, and enameled wires for the domestic Thai market.
North Asia, Region
During 2019, the Company’s China (and North Asia)APWC has four principal operations were conducted through five business entities – subsidiaries:
•Crown Century Holdings Ltd. (“Crown Century”), which is a registered Hong Kong company majority owned by APWC,
•Shanghai Asia PacificYayang Electric Co., Ltd. (“Shanghai Yayang”), Crown Century Holdings Limited (“CCH HK”), a PRC company that is majority owned by Charoong Thai,
•Pacific Electric Wire and Cable (Shenzhen) Co. Ltd. (“PEWSC”), Shandonga PRC company wholly owned by Crown Century, and
•Ningbo Pacific Rubber Cable Company,Co., Ltd. (“SPRC”)Ningbo”, collectively with PEWSC and Asia Pacific New Energy Corp. Ltd. (“APNEC”). The operating entities include Shanghai Yayang, formerly known as Shanghai Pacific Electric Co., Ltd.the “PRC Subsidiaries”), a subsidiaryPRC company wholly owned by Crown Century.
Our Company produces and sells enameled wires in Shanghai incorporatedChina. Our Company generally sells enameled wires directly to manufacturers of electric motors for use in June 1998 to manufacturevarious consumer appliances.PEWSC manufactures enameled wires. The Company’s effective holding inwires for
electric, video and audio products for the South China market. Shanghai Yayang,
is 68.75%. Shanghai Yayang manufacturedwhich had previously produced enameled wires,
with a diameter between 0.05mm and 2.5mm for sale and distribution inceased production at the
eastern part of China, and to Chinese and Taiwanese based end-users up to end of October
of 2019
then itand has been restructured as a trading
company.The Company has an effective holdingcompany in Shanghai that supplies mainly transformer, motor and coil manufacturers in the eastern part of 97.93% of the capital stock of CCH HK,China. Ningbo is currently a Hong Kong registered company, and its wholly-owned subsidiary company, PEWSC. PEWSC manufactures enameled wires for electric, video and audio products for both domestic and export sales.
The Company holds a 25.0% interest in SPRC, which manufactures rubber cables for the China market. The remaining 75% is owned by Shandong Yanggu Wire & Cable Corp. Ltd. (“Shandong Yanggu”), an established cable manufacturer in Shandong Province that produces a wide range of cable products.
Thedormant entity. Our Company continues to indirectly own the equity of Ningbo, which still holds its government-granted business license. TheOur Company has disposed of all of the buildings and most of the equipment and the land use rights for the property where the NingboNingbo’s operations werehad been situated. The principal machinery utilized at the Ningbo facility has either been sold or stored at other operating facilities of APWC.
Theour Company.
In the ROW, APWC has three principal subsidiaries:
•Sigma Cable Company Pte. Ltd. (“Sigma Cable”), a Singapore entity that is majority owned by APWC,
•Epan Industries Pte. Ltd., a Singapore company that is wholly owned by Sigma Cable, and
•Australia Pacific Electric Cable Pty. Ltd. (“APEC”), an Australian company majority owned by APWC through its ownership in Crown Century and Sigma Cable.
Our Company produces and sells low voltage power cables in Singapore and Australia. In addition, our Company sells a wide range of wire and cable products produced by third party suppliers in addition to PEWC. Our Company also offers SDI project engineering services for medium and high voltage power cables to power transmission projects in Singapore. SP Power Assets Ltd. has historically been the principal customer for our Company’s SDI services, accounting for nearly all of our SDI sales. Sales to SP Power Assets Ltd. are under a comprehensive contract, with purchase orders placed from time to time.
In addition to these principal subsidiaries in our reportable segments, we established
Asia Pacific New Energy Co. Ltd. (“APNEC”), a
new entity, APNEC,Taiwanese company, in Taipei City on October 26, 2018 for
thea new renewable energy business. APNEC seeks to develop an alternative energy business in Taiwan by availing itself of incentives provided by the Taiwan energy authority for the expansion of “green” energy alternatives.
This project remainsOn December 15, 2022, APWC increased its investment in APNEC in the form of a capital injection of $3.9 million (or NT$120 million). The purpose was to fund the fishery solar farm and on-train communication system integration projects. These projects remain at a development-stage and
APNEC has not generated
any revenuesmaterial revenue to date.
Rest
Dividends received from our operating subsidiaries and equity investees may be subjected to withholding taxes. Under the Corporate Income Tax Law of the World (“ROW”) RegionPRC, dividend distribution of profits to foreign investor(s) is subject to a withholding tax of 10%.
There is no withholding tax on dividend distributions from a Hong Kong entity to either residents or non-residents. In Thailand, dividends paid by a company to any individual or corporate payee overseas are subject to a withholding tax of 10%. Under the current Singapore corporate tax system, dividends paid by a Singapore resident company are tax exempt, and are not subject to withholding taxes. In Australia, dividends paid to non-residents are exempt from dividend withholding taxes except when dividends are paid out of profit that is not taxed by Australian income tax. APWC’s operating subsidiaries are also responsible for sales planning, marketing strategy and customer liaison. Our Company’s sales staff is knowledgeable about our Company’s products and also renders technical assistance, consulting services and repair and maintenance services to our Company’s customers. Our Company does not conduct sales through independent sales agents on a commission basis but uses its own sales employees located at APWC’s operating subsidiaries.
Payment methods for our Company’s products vary with markets and customers. The
Company’s ROW region currently consistsmajority of
its Singaporesales by our Company require payment within 90 days of product delivery, but may vary depending on the customer and
Australian operations.The Company’s Singapore operationspayment record. Sales pursuant to a successful project tender or sales to governmental or public utilities are principally conducted through Sigma Cablein accordance with the tender or other applicable regulations. In connection with SDI products, our Company (Private) Limited (“Sigma Cable”), an indirect, 98.3%-owned subsidiaryis required to pay PEWC 100% of the Company. The Company believes that Sigma Cable is onecost of the major suppliersproducts within 45 days from the date of power cableinvoice. In connection with a purchase of copper rod, our Company is required to pay PEWC the cost of the copper rod within 60 days of receipt of the products from PEWC. For the export market, payment is usually made by prior delivery of an irrevocable letter of credit. Neither APWC nor its operating subsidiaries offer financing for purchases of our Company’s products. Company employees engaged in Singapore. Sigma Cable manufacturessales and sellsmarketing are paid a rangesalary and may also receive a bonus based on performance.
Products are marketed under the respective names of
low voltage power cable products, used mainlythe operating subsidiaries in
infrastructure projects and commercial and residential developments. Sigma Cable is the exclusive distributor in Singapore of medium and high voltage wire and cableeach geography. For instance, products manufactured by
PEWC. It is alsoSiam Pacific are marketed under the
distributor for general wires“Siam Pacific” trade name. Products manufactured by
a third-party supplier.29
Sigma Cable also has project engineering operations in Singapore to supply, deliverare sold under the “Sigma Cable” brand.
Products and
install (referred to as “SDI”) primarily medium and high voltage cables to power transmission projects. While the Company currently obtains its supply of medium and high voltage power cables for its SDI operations from PEWC, other suppliers are also available if necessary.Sigma Cable owns 100% of the capital stock of Epan Industries Pte. Ltd. (“Epan”) a Singaporean Company. Currently, Epan is acting as the distributor of Sigma Cable products and those of other third party suppliers.
The Company’s business in Australia is conducted by Australia Pacific Electric Cable Pty. Ltd. (“APEC”). The Company’s indirect, beneficial ownership interest in APEC is 98.06%. APEC is located near Brisbane and is one of three major wire and cable manufacturers in Australia. APEC produces a range of power cables supplemented by imports from overseas sister companies. APEC possesses a substantial marketing and distribution infrastructure with a network of sales offices and warehouses in the cities of Brisbane, Sydney, Melbourne and Perth.
Services | 4.2.1
| Products and Services
|
Across theour Company’s three reporting segments, the Company engages in three principal business lines that consist of manufacturing and distributing wire and cable products, such as power cables and enameled wires, and providing project engineering services to certain customers. Theour Company manufactures and sells a wide variety of wire and cable products in primarily fourthree general categories: enameled wire, power cable, and telecommunications cables, power transmission cables, enameled wires, and electronic wires. The Company’s telecommunications and power cables are used in a range of infrastructure projects and in commercial and residential developments. Thecable. Our Company’s enameled wires are used in the manufacturing of components and sub-components of a number of household appliances and small machinery. The electronic wire productsOur Company’s telecommunications and power cables are used in the electronics, computer, building automation, audioa range of infrastructure projects and communication industries.in commercial and residential developments. In addition, theour Company acts as a distributor in Singapore of wire and cable products manufactured by PEWC and other third party suppliers in Singapore. ThePEWC. Our Company also offers SDI project engineering services of medium and high voltage cables for power transmission projects in Singapore.
Services
Fabrication
The Company performs fabrication services for its customers, converting raw materials to wire and cable products. Raw materials, such as copper, aluminum, polyvinyl chloride, polyethylene and optic fibers, are commodities traded on global markets with anticipated price fluctuations and currency risk. Given these risks, the Company provides fabrication services using customer-owned materials to pass exposure to the customer.
SDI Project Engineering Services
Given government and private sector infrastructure projects and residential and commercial buildings activity in Singapore, the Company anticipates modest demand for medium and high voltage power and for value added services in the power supply industry. To take advantage of these opportunities, the Company has developed an SDI project engineering capability. This SDI project engineering involves supply, delivery and installation of primarily medium and high voltage cables to power transmission projects in Singapore. Through entering into a contract to supply, deliver and install cables for a power transmission project, the Company delivers medium and high voltage cables and enters into subcontracting agreements with local companies to install the cables as required by the project.
Copper rod is the base component for most of
theour Company’s products. The manufacturing processes for these products require that the rod be “drawn” and insulated. In the “drawing” process, copper rod is drawn through a series of dies to reduce the copper to a specific diameter. For certain applications, the drawn copper conductor is then plated with tin. Copper used in cables is covered with various insulating materials that are applied in an extrusion process. The insulated wires are then combined, or “cabled” to produce the desired electrical properties and transmission capabilities. Then, depending upon the cable, some form of protective cover is placed over the cabled wires. A summary of the manufacturing process used for
theour Company’s primary wire and cable products is set forth below.
30
Enameled Wire
Our Company produces several varieties of enameled wires. Enameled wires are copper wires varnished, in an enameling process, by insulating materials. The enameling process makes the wires more resistant to oil, heat, friction and fusion, and therefore suitable for use in machinery and components and sub-components of manufactured goods. Our Company manufactures enameled wires in sizes that range from 0.02 mm to 4.00 mm in diameter, varnished by various types of petroleum insulation materials including polyvinyl formal, polyurethane wires and polyester. Enameled wire products are used in the assembly of a wide range of electrical products, including oil-filled transformers, refrigerator motors, telephones, radios, televisions, fan motors, air conditioner compressors and other electric appliances.
Power Cable
Our Company also produces a range of armored and unarmored low voltage power transmission cables. Low voltage power cables, generally considered to be cable with a capacity of 1 to 3.3 kilovolts, are typically used to transmit electricity to and within commercial and residential buildings, as well as to outdoor installations such as street lights, traffic signals and other signs. Armored low-voltage power cables are usually used for public lighting and power transmission running to buildings and installed either above or below ground. Unarmored low voltage cables are mainly used as lighting and power supply cables inside and outside of buildings. The voltage capacity of our Company’s power cables ranges from 300 volts to 1 kilovolt.
Production of unarmored cables begins by drawing and annealing of copper rods. The drawn copper wires are then stranded or “bunched” into round or sector-shaped conductors in sizes ranging from 1.5 square millimeters to 1000 square millimeters. The copper conductors are then covered in an extrusion process with a plastic insulator such as PVC, after which 2-5 conductors are twisted into a circular cable core in a cabling process and covered by a plastic outer cover.
Unarmored cables are composed of one or more cores of copper wire, insulated by substances such as PVC. Armored cables are produced in the same manner and the same range of configurations as unarmored cables, but with the addition of an outer layer of galvanized steel or iron wires to protect the cables from damage.
Telecommunications Cable
The
Our Company produces a wide range of bundled telecommunications cables for telephone and data transmissions with different capacities and insulations designed for use in various internal and external environments. The principal use of these cables is as access cables to connect buildings and residents to trunk cables. Telecommunications cables produced by
theour Company include copper-based and fiber optic cables.
Production of copper-based telecommunications cables begins by drawing a copper rod until it has reached the desired diameter, after which the drawn wires are subjected to a process called “annealing” in which the wires are heated in
order to make the wires softer and more pliable. Utilizing an extrusion process, which involves the feeding, melting and pumping of a compound through a die to shape it in final form as it is applied to insulate the wire, the wires are then covered by a polyethylene (“PE”) or polyvinyl chloride (“PVC”) compound and foam skin, suitable for different installations and environmental conditions. In order to reduce the cross-talk between pairs of communication wires, the insulated wires are then “twinned” or twisted so that two insulated single wires are combined to create a color-coded twisted pair. The twisted pairs of wires are then “cabled” or “stranded” into units of 25 twisted pairs for combination with other 25 pair units to form cable of various widths and capacities. The appropriate number of units is cabled together after stranding to form a round cables core. Depending upon the planned environment, a petroleum jelly compound may then be added to fill the cable core to seal out moisture and water vapor. Aluminum or copper tape is used to “shield” the cables and, finally, the shielded cable core is covered by plastic outer sheathing. TheOur Company manufactures telecommunications cables with capacities and sizes ranging from 25 to 3,000 pairs of 0.4 mm-diameter wires to 10 to 600 pairs of 0.9 mm-diameter wires.Power Cable
The
Services
Fabrication
Our Company produces a range of armoredperforms fabrication services for its customers, converting raw materials to wire and unarmored lowcable products. Raw materials, such as copper, aluminum, PVC, PE and optic fibers, are commodities traded on global markets with anticipated price fluctuations and currency risk. Given these risks, our Company provides fabrication services using customer-owned materialsin order to limit exposure to these risks.
SDI Project Engineering Services
Given government and private sector infrastructure projects and residential and commercial buildings activity in Singapore, our Company anticipates modest demand for medium and high voltage power transmission cables. Lowand for value added services in the power supply industry. To take advantage of these opportunities, our Company has developed an SDI project engineering capability. This SDI project engineering involves supply, delivery and installation of primarily medium and high voltage power cables generally considered to be cable with a capacity of 1 to 3.3 kilovolts, is typically used to transmit electricity to and within commercial and residential buildings, as well as to outdoor installations such as street lights, traffic signals and other signs. Armored low-voltage power cables are usually used for public lighting and power transmission runningprojects in Singapore. In entering into a contract to buildingssupply, deliver and installed either above or below ground. Unarmored lowinstall cables for a power transmission project, our Company delivers medium and high voltage cables are mainly usedand enters into subcontracting agreements with local companies to install the cables as lightingrequired by the project.
Raw Materials
As copper constitutes the most significant component of our Company’s wire and
power supply cables inside and outsidecable products, the price of
buildings. The voltage capacityour Company’s products depends primarily upon the price of
copper. In order to minimize the
Company’s power cables ranges from 300 volts to 1 kilovolt.Production of unarmored cables begins by drawing and annealingimpact of copper rods. The drawn copper wires are then stranded or “bunched” into round or sector-shaped conductors in sizes ranging from 1.5 square millimeters to 1000 square millimeters. The copper conductors are then covered in an extrusion process with a plastic insulator such as PVC, after which 2-5 conductors are twisted into a circular cable core in a cabling process and covered by a plastic outer cover.
Unarmored cables are composed of one or more cores of copper wire, insulated by substances such as PVC. Armored cables are produced in the same manner and the same range of configurations as unarmored cables, but with the addition of an outer layer of galvanized steel or iron wires to protect the cables from damage.
Enameled Wire
The Company also produces several varieties of enameled wires. Enameled wires are copper wires varnished, in an enameling process, by insulating materials. The enameling process makes the wires more resistant to oil, heat, friction and fusion, and therefore suitable for use in machinery and components and sub-components of manufactured goods. The Company manufactures enameled wires in sizes that range from 0.02 mm to 4.00 mm in diameter, varnished by various types of petroleum insulation materials including polyvinyl formal, polyurethane wires and polyester. Enameled wire products are used in the assembly of a wide range of electrical products, including oil-filled transformers, refrigerator motors, telephones, radios, televisions, fan motors, air conditioner compressors and other electric appliances.
31
Copper is the principal raw material used by the Company for copper-based products. Theprice fluctuations, our Company typically purchases copper at prices based on the average prevailing international spot market prices on the LME for copper for the one month prior to purchase. The price of copper is influenced heavily by global supply and demand as well as speculative trading. As with other costs of production, changes in the price of copper can affect theour Company’s cost of sales. Whether this has a material impact on theour Company’s operating margins and financial results depends primarily on theour Company’s ability to adjust selling prices to its customers, such that increases and decreases in the price of copper are reflected in those selling prices. In the cases when we enter into a long-term sales contract at fixed selling prices, rising copper prices could render this contract onerous and our Company would be required to recognize losses from this onerous contract in the income statement. Most sales of theour Company’s manufactured products reflect copper prices prevailing at the time the products are ordered. A long-term decrease in the price of copper would require theour Company to revalue the value of its inventory at periodic intervals to the then net realizable value, which could be below cost.
The
Our Company purchases copper in the form of rods and cathodes. Copper cathodes are thin sheets of copper purified from copper ore.
The Company presently utilizes the services of Thai Metal Processing Co., Ltd. to process its copper cathodes into copper rods in Thailand although the Company has a variety of processing companies from which it may obtain these services. Copper rods are drawn into copper wires for the production of
telecommunications cables,enameled wires, power cables and
enameled wires.Thetelecommunications cables. Copper purchased by our Company has historically purchased a substantial portionin the form of itscathodes must be sent to subcontractors to be melted and cast into the copper rods from PEWC. Under the Composite Services Agreement between the Company and PEWC, PEWC has agreed to supply to the Company on a priority basis with its copper rod requirements at prices at least as favorable as prices charged to other purchasers in the same markets purchasing similar quantities. However, the Company has diversified its copper purchases from among a number of preferred copper suppliers to ensure that we are consistently getting the most advantageous pricing on our copper purchases. Under the Company’s copper rod supply arrangements, orders are typically placed between eight to ten weeks before the desired delivery date, with prices “pegged” to the average spot price of copper on the LMEnecessary for the one month prior to delivery plus a premium.
The Company imports bothmanufacturing processes. For example, our Company’s operating subsidiaries in Thailand may import copper cathodes and utilizes services from their business partners, including Thai Metal Processing Co., Ltd., to process the copper rods in Thailand, with copper cathodes subjected to lower import duty than copper rods. Thecathodes.
Our Company’s key suppliers areinclude PT. Karya Sumiden Indonesia - Indonesia, PEWC-Taiwan, Walsin Lihwa Corporation.-Corporation - Taiwan, Mitsubishi Corporation RtM International Ptd.-Pte.- Singapore, Glencore International AG.-Switzerland, and Marubeni Corporation-Japan. TheOur Company attempts to maintain approximately a three to five weekfew weeks supply of copper rods and cathodes for its Thai operations and approximately a two to four week supply in Singapore. In PEWSC, the Company generally maintains one to two weeks of supply of copper rods and cathodes. In APEC, the copper supply is generally maintained at one to two weeks of anticipated requirements.Theoperations.
Our Company has regularly signed one-year contracts with each of
theits copper suppliers, pursuant to which
theour Company agrees to purchase a set quantity of copper each month. Under the terms of such contracts, the price of copper is typically pegged to the monthly average of the spot price of copper on the LME for the delivery month (M-0), or 1 month before delivery month (M-1) plus a premium.
TheOur Company has not had and does not anticipate any material supply interruption or difficulty in obtaining a sufficient supply of copper rod or
cathode. Thecathode, although the recent delays in shipping could increase our cost of acquiring copper. Our Company anticipates that its copper suppliers will be capable of providing an adequate supply of copper to meet
theour Company’s requirements and
theour Company does not anticipate any change in relations with its copper suppliers in the near term.
(See Item 3D: Risk Factors-Risks Relating to our Business: “The ability of suppliers to deliver raw materials, parts and components and energy resources could affect our Company’s ability to manufacture products without disruption and in turn negatively affect our operations.”).
Our Company has historically purchased a small portion of its copper rods from PEWC. Under the Composite Services Agreement, PEWC has agreed to supply our Company on a priority basis with our copper rod requirements at prices at least as favorable as prices charged to other purchasers in the same markets purchasing similar quantities. Our Company has diversified its copper purchases from among a number of preferred copper suppliers to ensure that our Company receives the most advantageous pricing on its copper purchases. Our Company does not currently purchase copper rods from PEWC.
Other raw materials used by theour Company include aluminum, which is used as a conductor in power cables and petroleum-based insulation materials such as PE, PVC and jelly compounds for insulating covers on cables and varnishes on enameled wires; aluminum foils for sheathing of communication cables; and galvanized steel wires for the production of armored wires. TheOur Company has not had and does not anticipate any difficulty in maintaining adequate supplies of these raw materials and expects to continue to be able to purchase such raw materials at prevailing market prices.Other than import tariffs in Thailand, theour Company does not face any restriction or control on the purchase or import of its raw materials. TheOur Company may freely choose its suppliers and negotiate the price and quantity of material with its suppliers. TheOur Company formulates consumption plans for raw materials regularly and continually monitors market conditions in respect of the supply, price and quality of raw materials. Inflation
would increaseincreases the cost of raw materials and operating expenses for
theour Company. If
inflation increases, theinflationary pressure persists, our Company
would trymay not be able to maintain its operating margins by
increasingraising the prices of its products.
32
In order to maintain product quality,
theour Company has implemented a range of quality control procedures under the supervision of dedicated quality control staff. Quality control procedures are implemented from the raw material to the finished product stages at each of
theour Company’s major production facilities. Raw materials are inspected to ensure they meet the necessary level of quality before production begins. During the manufacturing process, quality control procedures are performed at several stages of production. Upon completion, finished goods are brought to quality control centers set up in the
factoryproduction facilities for inspection and testing of different electrical and physical properties.
Depending on the requirements of its customers,
theour Company has the capability to manufacture
its products to meet a variety of different quality and production standards. These include local standards and certifications, such as the Singapore Institute of Standards and Industrial Research Quality Mark and the Thailand Industrial Standard, as well as other standards,
includingsuch as the National Electrical Manufacturers Association Standard, the British Standard, the Japan Industrial Standard and Underwriters Laboratories Inc.
Standard, as applicable.Standard.
All major companies in the APWC groupof our Company’s principal operating entities have attained International Standards Organization (“ISO”) 90029001 certification for quality management and assurance standards in the manufacture of electric wires and cables and have maintained that certification for at least the last ten years. TheThese certifications mean that the companiesthese entities have in place quality assurance systems and the capability to consistently manufacture products of quality.
The Company’s telecommunications cable and power cable products are primarily sold in the domestic markets of the countries where they are manufactured, whereas most of the enameled wires manufactured by the Company in Thailand are exported, primarily to customers throughout Southeast Asia. The following table sets forth the Company’s sales revenues for the periods indicated in its three reporting segments – North Asia region, Thailand region and ROW region for its three principal product lines, i.e., power, enameled and others together with their respective percentage share of total sales by reporting segment for such periods.
Year ended December 31, 2019 | North Asia | | Thailand | | ROW | | Total segments Consolidated | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Revenue from external customers | | | | | | | | | | | | |
Power | | — | | | 49,493 | | | 78,686 | | | 128,179 | |
Enamel | | 76,575 | | | 102,997 | | | — | | | 179,572 | |
Others* | | — | | | 19,889 | | | 10,520 | | | 30,409 | |
| | 76,575 | | | 172,379 | | | 89,206 | | | 338,160 | |
Year ended December 31, 2018 | North Asia | | Thailand | | ROW | | Total segments Consolidated | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Revenue from external customers | | | | | | | | | | | | |
Power | | — | | | 64,771 | | | 92,130 | | | 156,901 | |
Enamel | | 103,647 | | | 114,247 | | | — | | | 217,894 | |
Others* | | — | | | 34,406 | | | 16,739 | | | 51,145 | |
| | 103,647 | | | 213,424 | | | 108,869 | | | 425,940 | |
Year ended December 31, 2017 | North Asia | | Thailand | | ROW | | Total segments Consolidated | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Revenue from external customers | | | | | | | | | | | | |
Power | | — | | | 104,426 | | | 95,820 | | | 200,246 | |
Enamel | | 101,533 | | | 94,791 | | | — | | | 196,324 | |
Others* | | — | | | 7,268 | | | 21,377 | | | 28,645 | |
| | 101,533 | | | 206,485 | | | 117,197 | | | 425,215 | |
33
* Includes revenues from SDI service contracts, fabrications service contracts, and sales of other wires and cable products.
| Year ended December 31,
| |
| 2017 (a)
| |
| US$’000
| |
Manufactured Products
| | 361,853
| |
Distributed Products
| | 41,985
| |
SDI
| | 21,377
| |
Total Revenue
| | 425,215
| |
(a) The Company’s disaggregated revenues transitioned from reporting of Manufactured Products, Distributed Products and SDI segments in 2017 to reporting of Power, Enamel and Others product lines in 2018. Reported results of Power, Enamel and Others product lines provide improved understanding and insight to the performance of the Company and its products and services.
Our operating subsidiaries are also responsible for sales planning, marketing strategy and customer liaison. The Company’s sales staff is knowledgeable about the Company’s products and also renders technical assistance, consulting services and repair and maintenance services to the Company’s customers. The Company does not conduct sales through independent sales agents on a commission basis but uses its own sales employees located at the operating subsidiaries.
As copper constitutes the most significant component of the Company’s wire and cable products, the price of the Company’s products depends primarily upon the price of copper. In order to minimize the impact of copper price fluctuations, the Company attempts to determine the prices of its products based on the prevailing market price of copper. The Company may be affected, to a degree, in the short term by significant fluctuations in the price of copper.
Payment methods for the Company’s products vary with markets and customers. The majority of sales by the Company requires payment within 90 days, but may vary depending on the customer and payment record. Sales pursuant to a successful project tender or sales to governmental or public utilities are conducted in accordance with the tender or other applicable regulations. In connection with the distribution of medium and high voltage power cables manufactured by PEWC, the Company is required to pay PEWC 90% of the cost of the products either within 30 days of receipt of the product or, in the case of SDI products, upon installation, with the remaining 10% in either case to be paid within one year. In connection with the purchase of copper rod, the Company is required to pay PEWC the cost of the copper rod within 30 days from obtaining the products from PEWC. For the export market, payment is usually made by prior delivery of an irrevocable letter of credit. Neither the Company nor its operating subsidiaries offers financing for purchases of the Company’s products. Company employees engaged in sales and marketing are paid a salary and may also receive a bonus based on performance.
Products are marketed under the respective names of the operating subsidiaries. For instance, products manufactured by Siam Pacific are marketed under the “Siam Pacific” trade name. Products manufactured by Sigma Cable are sold under the “Sigma Cable” brand.
North Asia
The Company produces and sells enameled wires and electronic wires in China. The Company’s principal China operations are conducted through China business entities. The Company generally sells enameled wires directly to manufacturers of electric motors for use in various consumer appliances.
Thailand
The Company produces and sells telecommunication cables, enameled wires and power cables in Thailand. Charoong Thai is one of the leading cable manufacturers in Thailand. Our distribution channels include both direct sales to government entities and private sector participants in the infrastructure sector, and sales to agents for governmental entities. Sales within the Thailand region are made directly by the sales department of the Company’s operating subsidiaries in accordance with terms and pricing set by the local subsidiaries. The major customers of the Company include clients working with the government and its contractors.
34
ROW
The Company produces and sells low voltage power cables in Singapore and Australia. In addition, the Company sells a wide range of wire and cable products produced by third party suppliers and PEWC. The Company also offers SDI project engineering services for medium and high voltage power cables to power transmission projects in Singapore.
In 2019, sales of wire and cable products accounted for 86% of the total net sales in Singapore, with the remaining 14% of sales in Singapore representing SDI project engineering services. SP Power Assets Ltd. has historically been the principal customer for the Company’s SDI services, accounting for nearly all of our SDI sales. Sales to SP Power Assets Ltd. are under a comprehensive contract, with purchase orders placed from time to time.
The wire and cable industry in the Asia Pacific region is highly competitive. TheOur Company’s competitors include a large number of independent domestic and foreign suppliers. Certain competitors in each of theour Company’s markets have substantially greater manufacturing, sales, research and financial resources than the Company. Theus. Our Company and other wire and cable producers primarily compete on the basis of product quality and performance, reliability of supply, customer service, and price.
North Asia
PEWSC manufactures enameled wires in the Shenzhen Special Economic Zone in Guangdong Province for electronic, video and audio products in the south China market. It supplies mainly to transformer, motor and coil manufacturers. It faces competition principally from overseas imports and local manufacturers.
Shanghai Yayang has been restructured as a trading company in Shanghai and it supplies mainly transformer, motor and coil manufacturers in the eastern part of China. It faces competition principally from overseas imports and manufacturers in China.
The wire and cable industry in Thailand is highly competitive. In its various product lines,
theour Company competes with
a total of approximately thirty local wire and cable manufacturers and, to a lesser extent, with foreign producers for sales in Thailand of
telecommunications cables, power cables,
enameled wires, and
enameled wires. Thetelecommunications cables. Our Company is one of the five largest producers in the Thai market.
These five largest producers are the only producers of telecommunications cables approved by the Thai Industrial Standards Institute and, therefore, the only cable producers whose products may be used in government-commissioned projects. Governmental approval processes, tariffs and other import restrictions have limited competition in the Thailand market from foreign wire and cable producers.
TheOur Company also experiences significant competition from a number of smaller producers with regard to sales of enameled wire products.
Singapore
ROW
Although
the Company believeswe believe that Sigma Cable is one of the major suppliers of power cable products in Singapore
based on available data, it is subject to significant competition from producers within the region. There
isare no tariff or other
barrierbarriers against foreign competition in the local Singapore market, and potential competitors are free to enter the industry. Because of high capital costs,
theour Company does not presently anticipate that it is likely there will be new domestic entrants to the wire and cable industry in Singapore in the near future that would present material competition to
theour Company or be in a position to capture a material percentage of
theour Company's share of the market. However, the performance of Sigma Cable in
20192021 was
adversely impacted
adversely by increased intense competition from
Chineseother manufacturers seeking to capture a greater share of the Singaporean market.
Australia
Currently, besides
In addition to APEC, there are two major wire and cable producers with operations
located in Australia: Olex Cables (owned by Nexans) and Prysmian Cables, with factories in the States of Victoria and New South Wales, respectively. A significant portion of Australian market is serviced by two importers: (i) Electra Cables which reportedly imports cables from China factories; and (ii) World Wire Cables, which reportedly also sources cables from its Chinese partners to sell in
the Australian market. These companies are APEC’s principal competitors. APEC is the only power cable producer in the State of Queensland and therefore seeks to take advantage of its comparative proximity to Queensland-based customers in contrast to competitors that are required to transport their products into Queensland from other states in Australia. APEC has sales offices with warehousing facilities in Sydney, Melbourne, Brisbane, and Perth in order to attract and serve
the customers in those regions. APEC also has a distribution agreement with one of the regional suppliers with the goal of generating additional business for the Australia operations.
35
China
PEWSC manufactures enameled wires in the Shenzhen Special Economic Zone in Guangdong Province for electronic, video and audio products for the South China market and for export. It supplies mainly to overseas transformer, motor and coil manufacturers. It faces competition principally from overseas imports and local manufacturers.
Shanghai Yayang has been restructured as a trading company in Shanghai and it supplies mainly transformer, motor and coil manufacturers in the eastern part of China, locally in the Shanghai market and certain Taiwanese-based manufacturers. It faces competition principally from overseas imports and manufacturers from other provinces in China.
| 4.2.6
| Regional Considerations |
The principal Asian markets in which we do business have displayed higher overall economic growth in recent years compared to the United States and a number of other more developed markets, subject to occasional episodes of economic and currency exchange volatility attributable to various factors including the increased risks of emerging market investment, actual or potential political instability, and occasional pandemics.
North Asia
Our Company’s North Asia operations are conducted principally in China. The economy of China differs from that of most developed free-market economies in a number of respects, including structure, degree of government involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation, and balance of payments position. In
some countries,recent years, the
International Monetary Fund (the “IMF”) exerts considerable influence overgovernment of China has implemented economic
policy and provides support to stabilizereform measures which emphasize decentralization, expansion of consumption in the domestic
economy. In general,market, residential and commercial real estate development, infrastructure development, utilization of market forces and the
Asian markets in which we do business have been export-driven in recent years and have, in the casedevelopment of
China and Singapore, for example, accumulated considerable capital reserves, which contributes to a more stable business environment.foreign investment projects.
Thailand
RegionA substantial portion of the Company’s Thai operations, whose sales accounted for approximately 50.98% of the Company’s net sales in 2019, consists of the manufacture and sale of telecommunications and power cable for use in large-scale telecommunications projects and various construction projects in Thailand.
The volume of sales of
theseour Company’s products
in Thailand tends to correlate with the general level of economic activity in Thailand. As a result, the performance of
theour Company’s Thai operations depends in significant part on the general state of the Thai economy. Infrastructure development and related construction projects in Thailand depend significantly upon government sponsored initiatives. In recent years, the level of government involvement in infrastructure development has tended to track increases or contractions in Thailand’s gross domestic
product (“GDP”).product. Overall, the construction industry and infrastructure projects have slowed considerably, thereby affecting local sales, placing competitive pressure on prices and prompting
theour Company to rationalize Thai operations and actively seek overseas export markets. Political instability in Thailand tends to diminish governmental focus on infrastructure development projects, which can adversely impact the volume of sales to our customers who are engaged in large infrastructure projects.
Telecommunication and Enameled Wires
Sales of the Company’s telecommunication products in Thailand have depended to a significant degree on the substantial investment in and development of the telecommunications sector by the Thai government. In particular, the Company’s sales of products are affected by the value of contracts awarded by the government for telecommunications and other infrastructure projects.
The Company produces and sells copper core telecommunications cables, enameled copper wires and enameled aluminum wires in the Thai market and exports enameled wires to overseas markets. Sales of telecommunications cables, one of the Company’s leading products in Thailand, are conducted either by tender for participation in large scale telecommunications projects of the Telephone Organization of Thailand Corporation Plc. (“TOT”), or by sales directly to subcontractors of Triple T and True, the two private telephone line contractors licensed by TOT for particular projects. The Company generally sells enameled wires directly to electrical appliance manufacturers or to OEMs (original equipment manufacturers) for both the local and export markets, and in smaller units that are sold to local dealers.
36
Power
In Thailand, the prevailing historical trend has been that economic growth stimulates rapid growth in the demand for electric power, and annual rates of growth in electricity demand outpace annual economic growth rates. Despite the rapid growth in electricity demand, electricity consumption in Thailand remains low by international standards. The Company believes that, in the medium to longer term, there will be an increased demand for power supply which should lead to increased demand for the Company’s power cable products from both developers of power production facilities and contractors installing power supply lines.
Singapore
The Company’s distribution and project engineering business segments operate only in the Singapore market. In 2019, the Company realized $7.6 million in revenues from SDI projects, compared to $16.7 million in 2018 and $21.4 million in 2017.
Future revenue is expected to mirror population and residential growth while the Company continues to seek alternative ways to increase business volume in its project engineering business segment.
China
The economy of China differs from that of most developed free-market economies in a number of respects, including structure, degree of government involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation and balance of payments position. In recent years, the PRC government has implemented economic reform measures which emphasize decentralization, expansion of consumption in the domestic market, residential and commercial real estate development, infrastructure development, utilization of market forces and the development of foreign investment projects of which Shanghai Yayang is an example.
| C.
| OrganizationAL Structure
|
InsurancePlease refer to Business Overview in Item 4.B above.
| D.
| Property, PlantS and Equipment
|
The Company’s manufactured products are produced at facilities located on premises owned or leased by Siam Pacific, Charoong Thai, Sigma Cable, APEC, Shanghai Yayang and PEWSC. The following is a summary of the Company’s material facilities and operations.
Siam Pacific owns a 7.45 acre production facility near Bangkok, Thailand, located on a 26.79 acre site that it also owns. Telecommunications cables and enameled wires are manufactured at this facility. The production facility constitutes a portion of certain property and assets which are pledged to financial institutions.
Charoong Thai owns a 34 acre production facility in Chachoengsao province, near Bangkok, Thailand, where telecommunications cables and power cables are manufactured. The production facility is located on a 65 acre site which Charoong Thai also owns. Neither the production facility nor the land is mortgaged.
Sigma Cable produces power cables on a 19,373 square meter site in Singapore leased from the Jurong Town Corporation (“JTC”) for 30 years from September 16, 2000 to September 16, 2030. JTC is a government-linked corporation and is Singapore’s largest industrial landlord. Building assets are pledged to United Overseas Bank.
APEC owns a 6,735 square meter power cable manufacturing facility on a 39,000 square meter land parcel in Brisbane, Australia.
37
Shanghai Yayang ceased production by end of October of 2019 and has been restructured as a trading company, located in an area of approximately 27,839 square meters of state-owned land in an industrial district in Fengxian, Shanghai. The land and building are pledged to Industrial and Commercial Bank of China as security for a $1.8 million bank loan.
PEWSC manufactures enameled wires in a facility on 36,000 square meters of state-owned land with a built-up area of 20,367 square meters in Long Gang, Shenzhen, China. A leasehold right of industrial land use for the land has been granted for 49 years. The land and building are pledged to Agricultural Bank of China as security for a $1.1 million bank loan.
All of the Company’s facilities in Thailand, Singapore, Australia and China use production processes and equipment imported from Europe, the United States, Taiwan, or Japan.
The production capacity and extent of utilization of the Company’s facilities varies from time to time, and such information is considered to be commercially sensitive and proprietary information.
TheOur Company maintains insurance policies covering certain buildings, machinery and equipment against specified amounts of damage or loss caused by fire, flooding, other natural disasters and burglary and theft. TheOur Company does not carry insurance for consequential loss arising from business interruptions or political disturbances and does not carry product liability insurance. In addition, the Company does not have business liability or disruption insurance for its operations in China and the Company does not have coverage for flood damage or business interruption for its operations in Thailand. Consequently, the amount of our insurance coverage may not be adequate to cover all potential claims or liabilities, and we may be forced to bear substantial costs resulting from the lack of adequate insurance. No assurance can be given that we will not incur losses beyond the limits or outside the scope of coverage of our insurance policies. Accordingly, we may be subject to an uninsured or under-insured loss in such situations.
Please see “Our insurance coverage does not cover all of our business risks” is Section 3.d. above for more information regarding insurance coverage risks. | 4.6
| Environmental Regulations |
The
Our Company is subject to a variety of laws and regulations covering the storage, handling, emission and discharge of materials into the environment. TheOur Company believes that all of its operations are in material compliance with and in certain circumstances exceed the requirements of, all applicable environmental laws and regulations. TheOur Company has not been subjected to any material legal, regulatory or other action alleging violations or breaches of environmental standards.
ITEM 4A:
| UNRESOLVED STAFF COMMENTS
|
4.C. Organizational Structure
Please refer to Business Overview in Item 4.B. above.
4.D. Property, Plants and Equipment
Our Company’s manufactured products are produced at facilities located on premises owned or leased by Siam Pacific, Charoong Thai, Sigma Cable, APEC, and PEWSC. The following is a summary of our Company’s material facilities and operations.
Siam Pacific owns a 7.45 acre production facility near Bangkok, Thailand, located on its owned 26.79 acre site. Telecommunications cables and enameled wires are manufactured at this facility. The production facility constitutes a portion of certain property and assets which are pledged to financial institutions.
Charoong Thai owns a 34 acre production facility in Chachoengsao province, near Bangkok, Thailand, where telecommunications cables and power cables are manufactured. The production facility is located on a 65 acre site owned by Charoong Thai. Neither the production facility nor the land is mortgaged.
Sigma Cable produces power cables at a 19,373 square meter facility in Singapore leased from the Jurong Town Corporation (“JTC”) under a 30 year lease running from September 16, 2000 to September 16, 2030. JTC is a government-linked corporation and is Singapore’s largest industrial landlord. Building assets are pledged to United Overseas Bank.
APEC owns a 6,735 square meter power cable manufacturing facility situated on an owned 39,000 square meter land parcel in Brisbane, Australia. The manufacturing facility and land are pledged as security for a bank loan facility issued to APEC.
Shanghai Yayang ceased production in 2019 and was restructured as a trading company, located in an area of approximately 27,839 square meters of state-owned land in an industrial district in Fengxian, Shanghai. The land-lease and buildings were pledged as security for a 2020 loan that was repaid in full in 2021. No assets at this facility are presently encumbered.
PEWSC manufactures enameled wires in a facility on 36,000 square meters of state-owned land with a built-up area of 20,367 square meters in Long Gang, Shenzhen, China. A leasehold right of industrial land use for the land has been granted for 49 years expiring in July 5, 2046. The land and building are pledged to Agricultural Bank of China as security for a $2 million bank loan.
Most of our Company’s facilities in Thailand, Singapore, Australia and China use production processes and equipment imported from Europe, the United States, Taiwan, or Japan.
The production capacity and extent of utilization of our Company’s facilities vary from time to time, and such information is considered to be commercially sensitive and proprietary information.
ITEM 4A: UNRESOLVED STAFF COMMENTS
Not applicable
ITEM 5:
| OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
5.A. Operating Results
The following discussion should be read in conjunction with the information contained in our audited consolidated financial statements and notes thereto (the “Financial Statements”) referenced in Item 18 of this Annual Report.38
5.1Disclosures of Critical Accounting Policies
Summarized below are our accounting policies that we believe are important to the presentation of our financial results and require us to make estimates about the effect of matters that are uncertain in nature. Actual results may differ from these estimates, judgments and assumptions. Certain
Selected accounting policies are particularly critical because of their significance to our reported financial results and the possibility that future events may differ significantly from the conditions and assumptions underlying the estimates used and judgments made by our managementset out in preparing our financial statements. The following discussion should be read in conjunction with the consolidated financial statements and related notes, which are included in this annual report.Impairment of non-financial assets
At each reporting date or whenever events indicate that the asset’s value has declined or significant changes in the market with an adverse effect have taken place, the Company assesses whether there is an indication that an asset in the scope of IAS 36 may be impaired. If any indication exists, the Company completes impairment testing for the cash generating unit (“CGU”) to which the individual assets belong. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount of an individual asset or CGU is the higher of fair value less costs to sell and its value in use. The fair value less costs of disposal calculation is based on available data from binding sale arrangements, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposal of the assets. The value in use is measured at the net present value of the future cash flows the entity expects to derive from the asset or CGU. Cash flow projection involves subjective judgments and estimates which include the estimated useful lives of property, plant and equipment, capacity that generates future cash flows, capacity of physical output, potential fluctuations of economic cycle in the industry and the Company’s operating situation. See Note 15 – Property, Plant and Equipment –3 of our consolidated financial statements presented herewith.
Fair value of financial instruments
Where the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation techniques including income approach (for example, the discounted cash flows model) or the market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 11 of our consolidated financial statements presented herewith.
Measurement of ECL allowance for trade receivables
The Company applies the IFRS 9 simplified approach to measure lifetime expected loss allowance for trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of the sales over a period of 36 month before December 31, 2019 and the historical credit loss experience within this period. The historical loss rates are adjusted to reflect current and forward-looking information on general economic conditions affecting the ability of customers to settle receivables. The Company has identified the default rate of the countries where it sells goods and services as the most relevant factor and adjusts the historical loss rates based on expected changes accordingly.
39
Taxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. The Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the taxing authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of the companies.
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
Post-employment benefits under defined benefit plans
In accordance with the Thailand labor law, Charoong Thai and its subsidiaries are obliged to make payment to retiring employees, at rate of 1 to 13 times of their monthly salary rate, depending on the length of service. In addition, Charoong Thai also has the extra benefit plan to make payment to qualified retiring employees at rates of 1 to 26 times of their final monthly salary.
The cost of the defined benefit pension plan and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexity of the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
In determining the appropriate discount rate, management considers the inactive corporate bond trading in Thailand, taking into account the yields on Thai Government Bonds and extrapolated maturity corresponding to the expected duration of the defined benefit obligation.
The mortality rate is based on most recent mortality investigation on policyholders of life insurance companies in Thailand. Future salary increases and pension increases are based on expected future inflation rates derived from external economic data, together with historical experience of Charoong Thai.
Revenue recognition of SDI projects
Changes in percentage of completion result in changes in contract revenue and costs recognized in the statement of comprehensive income during the year. Significant estimation by management is also required in assessing the recoverability of contracts based on estimated total contract revenue and contract costs. In making such estimation, management’s evaluation is based on the actual level of work performed and past experience.
5.2Selected Operating Data
This discussion should be read in conjunction with the information contained in our Consolidated Financial Statements referenced in Item 18 of this Annual Report.
Report, which are prepared in accordance with IFRS as issued by the IASB.
Selected Operating Data
Results are analyzed and reported along the lines of our three principal business segments, consisting of the North Asia, region, the Thailand, region, and the ROW region.regions. Included in the summary table below are certain results within our 3three business segments with regard to net sales, operating profit, and operating profit margin for the periods covered. The following table sets forth selected summary data for the periods indicated (dollar ($) amounts in thousandsdesignated periods.
Operating Results
| | | | | | | | | | | | | | | | | |
| For the year ended December 31, |
| 2022 | | 2021 | | 2020 |
| (US$’000 except for percentages) |
| Net Sales: | | | | | |
| North Asia region | $ | 77,329 | | | $ | 107,032 | | | $ | 73,199 | |
| Thailand region | 171,841 | | | 197,779 | | | 143,647 | |
| ROW region | 184,723 | | | 171,848 | | | 96,718 | |
| Total | $ | 433,893 | | | $ | 476,659 | | | $ | 313,564 | |
| Operating profit/(loss): | | | | | |
| North Asia region | $ | 241 | | | $ | 4,523 | | | $ | 3,087 | |
| Thailand region | 2,636 | | | (13,537) | | | 11,250 | |
| ROW region | 7,768 | | | 6,690 | | | (4,492) | |
| Corporate expenses & adjustments | (2,578) | | | (2,649) | | | (2,288) | |
| Total operating (loss)/profit | $ | 8,067 | | | $ | (4,973) | | | $ | 7,557 | |
| Operating profit/(loss) margin: | | | | | |
| North Asia region | 0.31 | % | | 4.23 | % | | 4.22 | % |
| Thailand region | 1.53 | % | | (6.84) | % | | 7.83 | % |
| ROW region | 4.21 | % | | 3.89 | % | | (4.64) | % |
As of
US$).40
During 2018, Management changed the presentation of the operating data line items, replacing gross profit and gross profit margin with operating profit (loss) and operating profit (loss) margin. This changeDecember 31, 2022, APWC is intended to provide readers of our financial statements with more relevant information and a better explanation of the elements of performance.
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| (in thousands except for percentage) | |
Net Sales: | | | | | | | | | |
North Asia region | $ | 76,575 | | $ | 103,647 | | $ | 101,533 | |
Thailand region | | 172,379 | | | 213,424 | | | 206,485 | |
ROW region | | 89,206 | | | 108,869 | | | 117,197 | |
Total | $ | 338,160 | | $ | 425,940 | | $ | 425,215 | |
Operating profit (loss): | | | | | | | | | |
North Asia region | $ | 1,237 | | $ | 5,234 | | $ | 3,256 | |
Thailand region | | 3,042 | | | 9,539 | | | 11,053 | |
ROW region | | (1,659 | ) | | (2,306 | ) | | 1,205 | |
Corporate expenses & adjustments | | (3,269 | ) | | (3,783 | ) | | 1,101 | |
Total operating profit (loss) | $ | (649 | ) | $ | 8,684 | | $ | 16,615 | |
Operating profit (loss) margin: | | | | | | | | | |
North Asia region | | 1.62 | % | | 5.05 | % | | 3.21 | % |
Thailand region | | 1.76 | % | | 4.47 | % | | 5.35 | % |
ROW region | | (1.86 | )% | | (2.12 | )% | | 1.03 | % |
The Company is 75.4%approximately 80.96% beneficially owned and controlled by PEWC, a Taiwanese company. Thewith the remaining 24.6%approximately 19.04% of the issued and outstanding Common Shares arebeing publicly-traded in the United States and listed on Nasdaq. Based upon a review of Schedule 13D and 13G filings made with the CommissionSEC by shareholders, and a review of the share register maintained by the Company’sAPWC’s transfer agents in Bermuda and the U.S., the Company iswe are not aware that it hasof any shareholders residentresiding in the jurisdictions where theour Company has business operations. While theour Company’s operations and results are impacted by economic, fiscal, monetary and political policies of the respective governments in the countries where theour Company operates, that impact is not a function of APWC’s shareholder base. Inflation has, and may continue to, increase the shareholder basecost of raw materials and operating expenses for our Company. If inflationary pressure persists, we may not be able to maintain our operating margins even if we raise the Company.
41
price of our products.
| 5.3.1
| Year Ended December 31, 2019 Compared with Year Ended December 31, 2018
|
Year Ended December 31, 2022 Compared with Year Ended December 31,2021
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended
December 31, | | | | |
| 2022 | | 2021 | | Changes | | Changes |
| US$’000 | | US$’000 | | US$’000 | | % |
| Income Statement Data: | | | | | | | |
| Revenue | $ | 433,893 | | | $ | 476,659 | | | $ | (42,766) | | | (9.0) | |
| Costs of sales | (401,363) | | | (455,508) | | | 54,145 | | | (11.9) | |
| Gross profit | 32,530 | | | 21,151 | | | 11,379 | | | 53.8 | |
| Other operating income | 1,027 | | | 587 | | | 440 | | | 75.0 | |
| Selling, general and administrative expenses | (24,978) | | | (26,484) | | | 1,506 | | | (5.7) | |
| Other operating expenses | (512) | | | (227) | | | (285) | | | 125.6 | |
| Operating profit/(loss) | 8,067 | | | (4,973) | | | 13,040 | | | (262.2) | |
| Finance costs | (1,650) | | | (1,251) | | | (399) | | | 31.9 | |
| Finance income | 120 | | | 123 | | | (3) | | | (2.4) | |
| Share of loss of associates | (1) | | | (1) | | | — | | | — | |
| Exchange loss | 143 | | | (4,425) | | | 4,568 | | | (103.2) | |
| Other income | 889 | | | 671 | | | 218 | | | 32.5 | |
| Other expense | (3) | | | (1) | | | (2) | | | 200.0 | |
| Profit/(loss) before tax | 7,565 | | | (9,857) | | | 17,422 | | | (176.7) | |
| Income taxes benefit/(expense) | (2,808) | | | 1,345 | | | (4,153) | | | (308.8) | |
| Profit/(loss) for the year | 4,757 | | | (8,512) | | | 13,269 | | | (155.9) | |
| Attributable to: | | | | | | | |
| Equity holders of APWC | 3,874 | | | (2,642) | | | 6,516 | | | (246.6) | |
| Non-controlling interests | 883 | | | (5,870) | | | 6,753 | | | (115.0) | |
| | | | | | | |
| | | | | | | |
General
| For the Year Ended December 31, | | | | | | | |
| 2019 | | 2018 | | Changes in $ | | Changes in % | |
| (in thousands) | | | | | | | |
Income Statement Data: | | | | | | | | | | | | |
Revenue | $ | 338,160 | | | 425,940 | | | (87,780 | ) | | (20.6 | ) |
Costs of sales | | (313,373 | ) | | (389,692 | ) | | 76,319 | | | 19.6 | |
Gross profit | | 24,787 | | | 36,248 | | | (11,461 | ) | | (31.6 | ) |
Other operating income | | 385 | | | 805 | | | (420 | ) | | (52.2 | ) |
Selling, general and administrative expenses | | (25,051 | ) | | (26,924 | ) | | 1,873 | | | 7.0 | |
Other operating expenses | | (770 | ) | | (1,445 | ) | | 675 | | | 46.7 | |
Operating profit | | (649 | ) | | 8,684 | | | (9,333 | ) | | (107.5 | ) |
Finance costs | | (1,012 | ) | | (1,378 | ) | | 366 | | | 26.6 | |
Finance income | | 506 | | | 482 | | | 24 | | | 5.0 | |
Share of loss of associates | | (3 | ) | | (3 | ) | | — | | | — | |
Exchange gain/(loss) | | 1,550 | | | 1,741 | | | (191 | ) | | (11.0 | ) |
Other income | | 717 | | | 1,817 | | | (1,100 | ) | | (60.5 | ) |
Other expense | | (3 | ) | | (11 | ) | | 8 | | | 72.7 | |
Profit before tax | | 1,106 | | | 11,332 | | | (10,226 | ) | | (90.2 | ) |
Income taxes expense | | (2,057 | ) | | (3,886 | ) | | 1,829 | | | 47.1 | |
Profit for the year | | (951 | ) | | 7,446 | | | (8,397 | ) | | (112.8 | ) |
Attributable to: | | | | | | | | | | | | |
Equity holders of the parent | | (1,632 | ) | | 2,928 | | | (4,560 | ) | | (155.7 | ) |
Non-controlling interests | | 681 | | | 4,518 | | | (3,837 | ) | | (84.9 | ) |
Results of operations are determined primarily by market demand and government infrastructure projects, market selling prices of our products, our ability to manufacture high quality products efficiently in quantities sufficient to meet demand and to control production and operating costs. Our results are also influenced by a number of factors, including impacts from COVID-19, currency stability in the countries in which our operations are located, competition and the cost of raw materials, especially copper, which accounted for the majority of our cost of sales in 2019 2022 and 2018.
2021.
In order to minimize the impact of copper price fluctuations, we attempt to “peg” the prices of our products to the prevailing market price of copper and pass changes in the cost of copper through to customers as much as possible. In certain circumstances, however, we remain affected by fluctuations in the price of copper. A recent rise or decline in copper prices may not be fully reflected under this pricing scheme for several months.
Average copper prices per metric ton decreased by
7.97%5.37% from
$6,525$9,314 in
20182021 to
$6,005$8,814 in
20192022 (annual average).
Copper prices indicated in this reportAnnual Report are quoted from the index published by the LME. The 20192022 and 20182021 average copper prices were as follows:
| | 2019 | | 2018 | |
Average LME copper price ($/Ton) | Q1 | | 6,220 | | | 6,959 | |
| Q2 | | 6,114 | | | 6,872 | |
| Q3 | | 5,798 | | | 6,103 | |
| Q4 | | 5,888 | | | 6,168 | |
| Year | | 6,005 | | | 6,525 | |
| | | | | | | | | | | |
| | 2022 | 2021 |
| Average LME copper price ($/Ton) | Q1 | 9,984 | | 8,479 | |
| Q2 | 9,525 | | 9,711 | |
| Q3 | 7,741 | | 9,371 | |
| Q4 | 8,005 | | 9,697 | |
| Year | 8,814 | | 9,314 | |
The average copper price in March
20202023 on the LME was
$5,179$8,835 per
metric ton.
42
Revenue from the North Asia region decreased by
$27.1$30 million, or
26.1%28%, from
$103.6$107 million in
20182021 to
$76.6$77.3 million in
2019.2022. The decrease was attributable
to decreased sales volume primarily due to the
negative impact of the
conflict in Ukraine. The price of raw materials, crude oil, and natural gas rose, which squeezed the export market for home appliances and electronic consumer products, and export volume shrank. Also negatively affecting revenue were China’s 2020-2022 COVID lockdowns and the Sino-American trade war,
betweenwhich disrupted supply chains and the
United States and China.world economy.
Revenue from the Thailand region decreased by
$41.0$25.9 million, or
19.2%13%, from
$213.4$197.8 million in
20182021 to
$172.4$171.8 million in
2019.2022. The decrease was
attributable primarily
due to the
postponementdecrease in sales to the public sector in 2022 and depreciation of the
delivery of products per the request of a major client.Thai Baht, which depreciated by 9.71% compared to 2021.
Revenue decreasedincreased by $19.7$12.9 million, or 18.1%7%, from $108.9$171.8 million in 20182021 to $89.2$184.7 million in 20192022 in the ROW region. Increased product sales due to orders released to the market, after the Singapore government removed certain COVID-19 restrictions. A decline in the demand for cables decreased the revenues in Australia.
Gross Profit
Gross Profit increased by $11.4 million, or a 53.8% change, from $21.2 million in 2021 to $32.5 million in 2022. The
decreasegross profit margin was 7.5% in 2022 compared to 4.4% in 2021. The increase in gross profit margin was primarily
dueattributable to
intense competition.Gross Profit
While fluctuations in raw material acquisition are preferably placed upon the customer, limiting factors reduced the effects of this strategycopper price fluctuations, which decreased loss on onerous contracts and impacted Gross Profit. A decreasediminution in average copper prices per metric tonthe value of 7.97% plusinventory in 2022 in the intense competition and market slowdown primarily due to the trade war between USA and China all led to the material change in GrossThailand region.
Operating Profit of (31.6%)
Operating profit for
2019.Operating (Loss)
Operating (loss) for 20192022 was $(0.6)$8.1 million, representing a decrease by $9.3an increase of $13 million, or (107.5)%262.2%, from the operating profit $8.7loss of $(5) million in 2018.
2021.
The operating profit margin of the North Asia region decreased from
5.05%4.23% in
20182021 to
1.69%0.31% in
2019.2022. The decrease
was attributable primarily toresulted from a decrease in sales volume
which erodedand the
profit margin, and an increase in severance payments due to the restructurefluctuation of
Shanghai Yayang.copper prices.
The operating profit margin of the Thailand region
decreasedincreased from
4.47%(6.84)% in
20182021 to
1.76%1.53% in
2019.2022. The
decreaseoperating profit increase was
attributable primarilythe result of a 13.5% drop in copper prices compared to the
decrease in salesend of
higher margin products.2021.
The operating
lossprofit margin of the ROW region
decreasedslightly increased from
(2.12)%3.89% in
20182021 to
(1.86)%4.21% in
2019. The decrease was attributable primarily2022 due to
a decreasethe increased sales volume in
selling price, margin erosion because of competition, as well as higher unit costs.Singapore.
Our finance cost consistscosts consist mainly of interest on bank loans and borrowings. Interest cost decreasedcosts increased to $1.0$1.7 million in 20192022 compared to $1.4$1.3 million in 2018. However, interest-bearing2021. Interest-bearing loans and borrowings decreased to $11.3$57.7 million in 2019 2022
compared to $24.8$65.4 million in 20182021.The increase in interest is due to the increase in interest rates in various countries, and the decrease in loan repayments madebalance is due to the decrease in 2019.the required working capital due to the decrease in revenue.
Our finance income consists of interest earned on bank deposits. Interest income
remained consistent from $0.5were $0.1 million in
2018 to $0.5 million in 2019.both 2021 and 2022.
Share of Loss of Associates
The
Our share of loss remained consistent in
20192022 compared to that of
2018.2021. This was primarily due to the loss that
theour Company recognized in accordance with its percentage ownership interest in Siam Pacific Holding Company.
43
The exchange gain of 20192022 was primarily contributed byattributable to the depreciation of Thai Baht and appreciation of Thai Baht.Chinese RMB. The exchange rates aton December 31, 20192022 and 20182021 are listed below, based on the Noon Buying Rate. However,Note that they do not actually reflect the ongoingexchange rates during the year whenat which transactions actually took place.
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
Foreign currency to US$1: | | | | | | | Foreign currency to US$1: | | | |
Thai Baht | | 29.75 | | 32.31 | | Thai Baht | 34.59 | | | 33.33 | |
Singapore $ | | 1.345 | | 1.362 | | Singapore $ | 1.340 | | | 1.352 | |
Australian $ | | 1.423 | | 1.419 | | Australian $ | 1.470 | | | 1.377 | |
Chinese RMB | | 6.962 | | 6.876 | | Chinese RMB | 6.897 | | | 6.373 | |
Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.
Income tax expense was $2.1$2.8 million in 20192022 compared to $3.9($1.3) million in 2018. The change2021. Increase in taxation over the period 2021 to 2022 was mainlylargely due to the decrease of taxable income.better earnings in Thailand in 2022.
| 5.3.2
| Year Ended December 31, 2018 Compared with Year Ended December 31, 2017
|
| For the Year Ended December 31, | | | | | | | |
| 2018 | | 2017 | | Changes in $ | | Changes in % | |
| (in thousands) | |
Income Statement Data: | | | | | | | | | | | | |
Revenue | $ | 425,940 | | $ | 425,215 | | | 725 | | | 0.2 | |
Costs of sales | | (389,692 | ) | | (385,527 | ) | | (4,165 | ) | | (1.1 | ) |
Gross profit | | 36,248 | | | 39,688 | | | (3,440 | ) | | (8.7 | ) |
Other operating income | | 805 | | | 5,084 | | | (4,279 | ) | | (84.2 | ) |
Selling, general & administrative expenses | | (26,924 | ) | | (27,248 | ) | | 324 | | | 1.2 | |
Other operating expenses | | (1,445 | ) | | (909 | ) | | (536 | ) | | (59.0 | ) |
Operating profit | | 8,684 | | | 16,615 | | | (7,931 | ) | | (47.7 | ) |
Finance costs | | (1,378 | ) | | (1,221 | ) | | (157 | ) | | (12.9 | ) |
Finance income | | 482 | | | 876 | | | (394 | ) | | (45.0 | ) |
Share of loss of associates | | (3 | ) | | (3 | ) | | — | | | — | |
Loss on liquidation of a subsidiary | | — | | | (261 | ) | | 261 | | | 100.0 | |
Exchange gain/(loss) | | 1,741 | | | 2,784 | | | (1,043 | ) | | (37.5 | ) |
Other income | | 1,817 | | | 214 | | | 1,603 | | | 749.1 | |
Other expense | | (11 | ) | | (336 | ) | | 325 | | | 96.7 | |
Profit before tax | | 11,332 | | | 18,668 | | | (7,336 | ) | | (39.3 | ) |
Income taxes expense | | (3,886 | ) | | (5,140 | ) | | 1,254 | | | 24.4 | |
Profit for the year | $ | 7,446 | | $ | 13,528 | | | (6,082 | ) | | (45.0 | ) |
Profit attributable to APWC | | 2,928 | | | 8,720 | | | (5,792 | ) | | (66.4 | ) |
Profit attributable to non-controlling interests | | 4,518 | | | 4,808 | | | (290 | ) | | (6.0 | ) |
44
Year Ended December 31, 2021 Compared with Year Ended December 31, 2020
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Year Ended
December 31, | | | | |
| 2021 | | 2020 | | Changes | | Changes |
| US$’000 | | US$’000 | | US$’000 | | % |
| Income Statement Data: | | | | | | | |
| Revenue | $ | 476,659 | | | $ | 313,564 | | | $ | 163,095 | | | 52.0 | |
| Costs of sales | (455,508) | | | (279,686) | | | (175,822) | | | 10.7 | |
| Gross profit | 21,151 | | | 33,878 | | | (12,727) | | | (37.6) | |
| Other operating income | 587 | | | 814 | | | (227) | | | (27.9) | |
| Selling, general and administrative expenses | (26,484) | | | (27,006) | | | 522 | | | (7.8) | |
| Other operating expenses | (227) | | | (129) | | | (98) | | | 83.2 | |
| Operating (loss)/profit | (4,973) | | | 7,557 | | | (12,530) | | | 1264.4 | |
| Finance costs | (1,251) | | | (744) | | | (507) | | | 26.5 | |
| Finance income | 123 | | | 320 | | | (197) | | | (61.6) | |
| Share of loss of associates | (1) | | | (1) | | | — | | | 66.7 | |
| Exchange gain/(loss) | (4,425) | | | (579) | | | (3,846) | | | 664.2 | |
| Other income | 671 | | | 1,173 | | | (502) | | | (42.8) | |
| Other expense | (1) | | | (1) | | | — | | | 66.7 | |
| Profit before tax | (9,857) | | | 7,725 | | | (17,582) | | | (227.6) | |
| Income taxes expense | 1,345 | | | (4,016) | | | 5,361 | | | (95.2) | |
| Profit/(loss) for the year | (8,512) | | | 3,709 | | | (12,221) | | | 490.0 | |
| Attributable to: | | | | | | | |
| Equity holders of APWC | (2,642) | | | (552) | | | (2,090) | | | 66.2 | |
| Non-controlling interests | (5,870) | | | 4,261 | | | (10,131) | | | (237.8) | |
Results of operations are determined primarily by market demand and government infrastructure projects, market selling prices of our products, our ability to manufacture high quality products efficiently in quantities sufficient to meet demand and to control production and operating costs. Our results are also influenced by a number of factors, including
impacts of COVID-19, currency stability in the countries in which our operations are located, competition and the cost of raw materials, especially copper, which accounted for the majority of our cost of sales in
20182021 and
2017.2020.
In order to minimize the impact of copper price fluctuations, we attempt to “peg” the prices of our products to the prevailing market price of copper and pass changes in the cost of copper through to customers as much as possible. In certain circumstances, however, we remain affected by fluctuations in the price of copper. A recent rise or decline in copper prices may not be fully reflected under this pricing scheme for several months.
Average copper prices per metric ton increased by
5.87%50.98% from
$6,163$6,169 in
20172020 to
$6,525$9,314 in
20182021 (annual average).
Copper prices indicated in this reportAnnual Report are quoted from the LME index.index published by the LME. The 20182021 and 20172020 average copper prices were as follows:
| | 2018 | | 2017 | |
Average LME copper price ($/Ton) | Q1 | | 6,959 | | | 5,834 | |
| Q2 | | 6,872 | | | 5,663 | |
| Q3 | | 6,103 | | | 6,347 | |
| Q4 | | 6,168 | | | 6,808 | |
| Year | | 6,525 | | | 6,163 | |
| | | | | | | | | | | |
| | 2021 | 2020 |
| Average LME copper price ($/Ton) | Q1 | 8,479 | | 5,638 | |
| Q2 | 9,711 | | 5,341 | |
| Q3 | 9,371 | | 6,521 | |
| Q4 | 9,697 | | 7,174 | |
| Year | 9,314 | | 6,169 | |
The average copper price in March 2019 on the LME was $6,451 per metric ton.
Revenue from the North Asia region
slightly increased by
$2.1$33.8 million, or
2.1%46.2%, from
$101.5$73.2 million in
20172020 to
$103.6$107 million in
2018.2021. The increase was
primarily attributable
primarily to
an increaseincreases in copper
price.prices and lower sales in 2020 because of the COVID-19 pandemic.
Revenue from the Thailand region
slightly increased by
$6.9$54.2 million,
or 37.7%, from
$206.5$143.6 million in
20172020 to
$213.4$197.8 million in
2018, or 3.4%.2021. The increase was primarily
attributable to increases in copper prices and lower sales in 2020 because
the appreciation of the
Baht against the US dollar.COVID-19 pandemic.
Revenue decreased by $8.3 million, or 7.1%, from $117.2 million in 2017 to $108.9 million in 2018 in the ROW region. Whileregion increased productby $75.1 million, or 77.7%, from $96.7 million in 2020 to $171.8 million in 2021. The increase was primarily due to deferral of orders from 2020 to 2021 and increased local sales in APEC led2021 resulting from stricter border controls related to increased revenueCOVID-19.
Gross Profit
Gross Profit decreased by $12.7 million, or a 37.6% change, from $33.9 million in 2020 to $21.2 million in 2021. The gross profit margin was 4.4% in 2021 compared to 10.8% in 2020. The decrease of
7.7%, intense competition from Chinese imports decreased the revenue of Sigma Cable by 13.4%.Gross Profit
While fluctuations in raw material acquisition are preferably placed upon the customer, limiting factors reducedgross profit margin was primarily attributable to the effects of this strategy and impacted Gross Profit. An increase in average copper prices per metric ton of 5.87% caused Revenue to experience an increase of 0.2%. However, strong competition limited pricing flexibility as a mitigation measure for the copper price increasefluctuation, which increased loss on onerous contracts and diminution in the Company experienced an increased Costvalue of sales of (1.1%). The increasesinventory in both Revenue and Cost of sales led to2021 in the material change in Gross Profit of (8.7%) for 2018.
Thailand region.
Operating
profitloss for
20182021 was
$8.7$(5) million, representing a decrease
by $7.9of $12.6 million, or
(47.7)%165.8%, from
$16.6the operating profit of $7.6 million in
2017.2020.
The operating profit margin of the North Asia region increased from
3.21%4.22% in
20172020 to
5.05%4.23% in
2018.2021. The
increaseoperating profit was
attributable primarily to the decreasenot affected by copper price fluctuation in
the costs and expenses related to NPC.45
North Asia.
The operating profit margin of the Thailand region
slightly decreased from
5.35%7.83% in
20172020 to
4.47%(6.84)% in
2018.2021. The decrease was
attributable primarily
due to
higher copper prices, resulting in increased losses on onerous contracts and diminution in the
increase in salesvalue of
lower margin products, decrease in sales of higher margin products and increase in payroll expenses.inventory.
The operating profit margin of the ROW region
decreasedincreased from
1.03% in 2017 to operating loss (2.12)(4.64)% in
2018.2020 to 3.89% in 2021. The
decreaseincrease was
primarily attributable
primarily to
the decrease in revenue.decreased competition due to COVID-19.
Our finance cost consistscosts consist mainly of interest on bank loans and borrowings. Interest cost increased to $1.4$1.3 million in 20182021 compared to $1.2$0.7 million in 2017. However, interest-bearing2020. Interest-bearing loans and borrowings decreasedincreased to $24.8$65.4 million in 20182021 compared to $41.1$13.8 million in 20172020.The proceeds of these loans were mainly used to fund capital expenditures, raw material purchase and working capital needs of our Company due to the extinguishment of current liabilities at year end of 2018.higher sales and copper prices.
Our finance income consists of interest earned on bank deposits. Interest income decreased
by $0.4 million, or 45.0%, from
$0.9$0.3 million in
20172020 to
$0.5$0.1 million in
2018.2021.
Share of Loss of Associates
The
Our share of loss
of an associate remained
the sameconsistent in
20182021 compared to that of
2017.2020. This was primarily due to the loss that
theour Company recognized in accordance with its percentage ownership interest in
SPHC.Loss on liquidationSiam Pacific Holding Company.
Exchange Gain/(Loss)
The exchange loss of
subsidiariesThe Company incurred a total write-off of its interest in Sigma Epan, which amounted to $0.3 million during 2017 due2021 was primarily attributable to the strike-offdepreciation of Sigma Epan Industry.
Exchange Gain/(Loss)
Thai Baht and appreciation of Chinese RMB. The exchange rates aton December 31, 20182021 and 20172020 are listed below, based on the Noon Buying Rate. However,Note that they do not actually reflect the ongoingexchange rates during the year whenat which transactions actually took place.
| As of December 31, | |
| 2018 | | 2017 | |
Foreign currency to US$1: | | | | | | |
Thai Baht | | 32.31 | | | 32.56 | |
Singapore $ | | 1.362 | | | 1.336 | |
Australian $ | | 1.419 | | | 1.280 | |
Chinese RMB | | 6.876 | | | 6.506 | |
| | | | | | | | | | | |
| As of December 31, | |
| 2021 | 2020 | |
| Foreign currency to US$1: | | | |
| Thai Baht | 33.33 | | 30.02 | | |
| Singapore $ | 1.352 | | 1.321 | | |
| Australian $ | 1.377 | | 1.297 | | |
| Chinese RMB | 6.373 | | 6.525 | | |
Sources: Federal Reserve Bulletin, Board of Governors of the Federal Reserve System. Federal Reserve Statistical Release H.10, from the website of the Board of Governors of the Federal Reserve System at http://www.federalreserve.gov.
Income tax expense was
$3.9($1.3) million in
20182021 compared to
$5.1$4.0 million in
2017.2020. The
change wasdecrease of income tax is mainly due to
the decrease of the income before income tax.46
deferred tax assets from net operating losses recognized by Charoong Thai in 2021. | 5.4
| Liquidity and Capital Resources
|
5.B. Liquidity and Capital Resources
As of December 31,
2019,2022, we had
$53.7$54 million in cash and cash equivalents, primarily in bank accounts and cash on hand.
The majority of this cash and cash equivalents was held at our operating subsidiaries in Thai Bhat, U.S. dollars, and Chinese RMB. Our current sources of cash are our cash on hand, cash generated by our operations, and our credit facilities. Our liquidity is primarily utilized for the purchase and replacement of property, plant and equipment, future acquisitions and expenditures for ongoing operations.
We maintain several revolving working capital and overdraft credit facilities with various commercial bank groups and financial institutions. Under our lineinstitutions (the “Facilities”). As of credit arrangements for short-term debt with our banks, we may borrow up toDecember 31, 2022, the total amount of the Facilities was approximately $287.0$254.9 million includingand the unused amount of the Facilities was approximately $162.1 million (taking into account letters of credit for commodity purchases, on such terms as we and the banks mutually agreed upon. These arrangementsissued thereunder). The Facilities do not have termination dates but are reviewed annually for renewal. As of December 31, 2019, the unused portion of the credit lines was approximately $207.9 million. Letters of credit are issued on our behalf in the ordinary course of business by our banks as required by certain supplier contracts. As of December 31, 2019, the Company had obligations in respect of amounts callable under issued, but undrawn, letters of credit totaling $15.2 million. Liabilities relating to the letters of credit are included in current liabilities. There is no seasonality to theour Company’s borrowing.We have For details of our Company’s bank loans and borrowings, see Note 11(b) to our consolidated financial statements. As of December 31, 2022, a majority of the short-term bank loans and borrowings were held at variable interest rates, whereas the long-term bank loans were held at a fix interest rate.
Except for foreign currency forward contracts, our Company did not use other derivatives to hedge financial risks in 2022. Please refer to Note 11(c) and Note 27 to our consolidated financial statements for information about the management of financial risks.
In February 2022, we completed a rights offering in which we received gross proceeds of approximately $8.3 million, before expenses of the rights offering, from the sale of 6,796,558 Common Shares. The net proceeds of the rights offering will be used for general working capital and corporate purposes. The Company’s controlling shareholder, PEWC, purchased 6,259,924 Common Shares which included an exercise of over-subscription rights.Please see Item 10 of this Annual Report for additional information regarding the rights offering.
On July 10, 2020, APWC entered into a secured loan agreement (the “Secured Loan”) with PEWC as lender. In August 2020, we borrowed the principal amount of $6 million at a fixed 3% rate of interest under the Secured Loan, pledging our Company’s 98.3% ownership stake in Sigma Cable as collateral. The Secured Loan was repaid in full in 2021, the facility was terminated and the shares pledged as collateral are unencumbered.
APWC has no direct business operations other than ourits ownership of the capital stock of ourits subsidiaries and equity investees. As a holding company, the Company’sAPWC’s ability to pay dividends, as well as to meet its other obligations such as holding company needs, depends mainly upon the amount of distributions, if any, received from the Company’sits operating subsidiaries and other holdings and investments. Consequently,
The working capital and capital expenditure needs of APWC’s operating subsidiaries are primarily funded and met by their own operations and borrowings from banks. APWC does not fund the operations or capital expenditure needs of its subsidiaries on an ordinary course basis. However, the Board may authorize contributions from time to time to its
subsidiaries on an as-needed basis. There were no contributions from APWC to any of our subsidiaries have been and will continue to be our primary source of funds. for the years ended December 31, 2022, 2021, or 2020.
Of the
$53.7$54 million in cash and cash equivalents that we had on hand as of December 31,
201, $1.32022, $5.4 million was held at
the holding company,APWC, and the remainder was held by
its subsidiaries.
APWC uses its cash position to pay operating expenses and other obligations. All of the
approximately $287.0 million of our credit linesFacilities are at the subsidiary level;
the holding companyAPWC does not have any
credit lines. Corporate needs (including holding company needs) are funded primarily by distributions from our subsidiaries. We rely upon distributions of dividends from our subsidiaries in order to pay dividends declared by our Board of Directors. OurFacilities. APWC’s operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to
us,APWC, including, but not limited to, as a result of restrictive covenants contained in
ourtheir loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other currency, and other regulatory restrictions. For example, PRC legal restrictions permit payments of dividends by our business entities in the PRC only out of their retained earnings, if any, determined in accordance with relevant PRC accounting standards and regulations. Under PRC law, such entities are also required to set aside a portion of their net income each year to fund certain reserve funds. These reserves are not distributable as cash dividends. The foregoing restrictions may also affect
ourAPWC’s ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary. Distributions may also be limited from time to time by reason of restrictions protective of the rights of minority shareholders of
ourAPWC’s subsidiaries and by reason of the current cash requirements of
theits operating subsidiaries. Consequently, we periodically need to manage our corporate cash needs to align with the permitted timing of distributions.
Net cash provided by operating activities in the year ended December 31, 20192022 was $15.1$6.6 million, as compared to $40.6$41.6 million of net cash provided inused by operating activities in the year ended December 31, 2018. The decrease2021.
Net cash used by operating activities in
cash generated from operationsthe year ended December 31, 2021 was
primarily due$41.6 million, as compared to
decrease in sales.Net$16.4 million of net cash provided by operating activities in the year ended December 31, 2018 was $40.6 million, as compared to $16.9 million of net cash used in operating activities in the year ended December 31, 2017.2020. The increase in cash generatedused from operations was primarily due to decrease in inventory and accounts receivable, which was relatedhigher copper prices compared to the increased revenue in late 2018.
2020.
Days of sales outstanding (“DSO”) is a measure of the average collection period of accounts receivable, and although the calculation is influenced by the period used and the timing of sales within that period, it can provide insight into the variances in collections from period to period. Our days of sales outstandingDSO for 20192022 was 8378 days, as compared to 8271 days for 2018.2021. The change was primarily due to the pandemic being effectively controlled, as the impact of COVID-19 boosted the DSO for 2022. We have in place policies across theour Company that emphasize the importance of continuous focus on collection efforts.47
In
2019,2022, cash used in investing activities was
$6.4$2.7 million compared to
$4.8$6.2 million used in investing activities in
2018.2021. The
increasedecrease in net cash used in investing activities was primarily attributable to
increased purchase indecreased purchases of property, plant and
equipment.equipment in 2022.
In
2018,2021, cash used in investing activities was
$4.8$6.2 million compared to
$3.4$20.3 million
provided byused in investing activities in
2017.2020. The decrease in net cash
provided byused in investing activities was primarily attributable to
the proceeds from disposaldecreased purchases of
property, plant and equipment
of our Ningbo Pacific Cable Co. Ltd. subsidiary (“NPC”) in
2017.2021.
Net cash used ininflows from financing activities was $17.9were $9.6 million in 2019. In 2019, net2022. The cash usedinflows in 2022 were primarily attributable to a decrease in borrowings.
Net cash inflows from financing activities
reflected primarily the repayment of borrowings.Net cash used in financing activities was $19.6were $42.4 million in 2018. In 2018, net2021. The cash usedinflows in financing activities reflected2021 were primarily the repayment ofattributable to an increase in borrowings.
We believe funds generated by our operating activities, our cash on hand and amounts available to us under our credit facilities will provide adequate cash to fund our requirements through at least the next twelve months. We believe that we have sufficient liquidity to meet our anticipated working capital, capital expenditures, general corporate requirements, and other short-term and long-term obligations as they come due. We also believe that our strong cash and cash equivalents position are critical at this time of uncertainty. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may enhance our liquidity by way of onebe required to seek additional equity or more debt and/or equity financingsfinancing (including by engaging in debt and/or equity financings with our principal shareholder).
| 5.5
| Research and Development
|
The following table sets forth our Company’s contractual obligations as of December 31, 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Payments due by period |
Contractual obligations (In thousands of US$) | Total | | Less than 1 year | | 1-5 years | | More than 5 years |
| Interest-bearing loans and borrowings | $ | 60,973 | | | 46,087 | | | 10,016 | | | 4,870 | |
| Lease obligations | 2,909 | | | 788 | | | 1,542 | | | 579 | |
| Capital commitment relating to factory building improvement and acquisition of machinery | 670 | | | 630 | | | 40 | | | — | |
| Purchase obligations for raw materials | 224,655 | | | 224,655 | | | — | | | — | |
| $ | 289,207 | | | 272,160 | | | 11,598 | | | 5,449 | |
Our Company has not entered into any transactions with unconsolidated entities whereby our Company has financial guarantees or other contingent arrangements that expose our Company to material continuing risks, contingent liabilities, or any other obligation in an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to our Company.
5.C. Research and Development
Our Company does not currently engage in its own research and development. Under the Composite Services Agreement with PEWC described herein, theour Company benefits from research and development conducted by PEWC at little or no cost to theour Company. Accordingly, theour Company has not made material expenditures on or commitments to research and development since its formation.
5.D. Trend Information
We are not aware of any trend, commitment, event or uncertainty that can reasonably be expected to have a material effect on our current or future business other than the following, each of which has materially impacted our financial results in the past and may do so in the future:
•Uncertainty arising from the volatility in the cost of copper, our principal raw material. In 2019, the The yearly average copper price went downper ton increased from $6,525 (yearly$6,169 in 2020 to $9,314 in 2021, and decreased to $8,814 in 2022. Copper prices reached a record high in March 2022, with the monthly average for 2018)copper price of $10,237 per metric ton to $6,005 per metric ton (yearly average for 2019).ton. Under our business model, theour Company, like other companies in the industry, remains subject tois affected by movements in the price of copper, our principal raw material.
•Fluctuations in the demand for our products in the markets in which we do business. Demand for our products in the markets in which we do business fluctuates based upon variations in the level of governmental and private investments in communications, power and industrial projects and programs that utilize our products. We are not an end-user of our products and, therefore, we depend upon the requirements of our customers to generate sales.
(See “Quantitative“Item 11. Quantitative and Qualitative Disclosures About Market Risks.”)
| 5.7
| Off-Balance Sheet Arrangements
|
5.E. Critical Accounting Estimates
The
Company has not entered into any transactionscritical accounting estimates and judgements and those that are most significant in connection with
unconsolidated entities whereby the Company hasour financial
guarantees, subordinated retained interests, derivative instruments, or other contingent arrangements that expose the Company to material continuing risks, contingent liabilities, or any other obligationstatement policies are set out in
an unconsolidated entity that provides financing, liquidity, market risk, or credit risk support to the Company.48
| 5.8
| Contractual Obligations
|
The following table sets forth the Company’s contractual obligations asNote 3.23 of December 31, 2019:
| Payments due by period | |
Contractual obligations (In thousands of US$) | Total | | Less than 1 year | | 1-5 years | | More than 5 years | |
Bank loans and overdrafts | $ | 11,356 | | | 11,356 | | | — | | | — | |
Lease obligations (principal amount only) | | 2,828 | | | 574 | | | 1,169 | | | 1,085 | |
Finance charges on lease obligations | | 364 | | | 82 | | | 185 | | | 97 | |
Operating lease obligations | | 12 | | | 11 | | | 1 | | | — | |
Capital commitment relating to installation of equipment and acquisition of machinery | | 5,817 | | | 5,817 | | | — | | | — | |
Capital commitment relating to repair and maintenance consulting service | | 348 | | | 348 | | | — | | | — | |
Purchase obligations for copper cathodes | | 290,371 | | | 290,371 | | | — | | | — | |
| $ | 311,096 | | | 308,559 | | | 1,355 | | | 1,182 | |
The contractual obligation for the purchase of copper cathodes disclosed in the table above reflects the minimum purchase commitment. For more details on financial commitments and contingencies, please refer to our audited consolidated financial statements and the notes thereto referenced in Item 18: “Financial Statements”.
Please see the section18 of this report entitled “Cautionary Statement Regarding Forward-Looking Statements”
ITEM 6:
| DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
|
Annual Report, which are prepared in accordance with IFRS as issued by the IASB. | 6.1
| Directors and Senior Management
|
Given the uncertainties inherent in our business activities, we must make certain estimates and assumptions that require difficult, subjective and complex judgments. Because of uncertainties inherent in such judgments, actual outcomes and result may differ from our assumptions and estimates, which could materially affect our consolidated financial statement.There is only
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
6.A. Directors and Senior Management
APWC has one class of directorshipsdirectors with each director entitled to one vote on any matters presented to the Board, and no one or morenone of the directors possess any veto power over matters presented to the Board or any other special or enhanced voting rights. The Bye-Laws provide that a quorum consists of a majority of the directors then in office. As of December 31, 2019, there were a total2022, APWC's Board was comprised of nine (9)eight (8) directors, on the Board, including its three independent directors, Mr. Anson Chan, Dr. Yichin Lee, and Dr. Lambert Ding. By a resolution passed at the Company’sAPWC’s most recent annual general meeting of shareholders (the “20192022 AGM”) held on August 30, 2019,September 16, 2022, the shareholders determined thatset the minimum number of directors shall be fixed at two (2) and the maximum number of directors be fixed at nine (9). Each director is entitled to one vote, and approval of any matter requires a simple majority assuming a quorum is present. The following table sets forth certain information concerning the current directors and certain other officers of the Company.APWC. All directors are subject to annual election by the shareholders of the Company.APWC. Each of the directors was reelected at the Company’s 2019APWC’s 2022 AGM. Officers generally hold office for such period and upon such terms as the Board may determine. Name
| | | | | | | | | | | | | | |
| Name | | Date of Birth | | Position |
Ocorian Services (Bermuda) Limited. | | N/A | | Assistant Resident Secretary |
Anson Chan | | November 3, 1963 | | Independent director, Audit Committee Chairman |
Andy C.C. Cheng
| April 29, 1958
| Director and Non-Executive Chairman of the Board
|
Fang Hsiung Cheng
| May 31, 1942
| Director
|
Daphne Hsu
| August 12, 1962
| Financial Controller
|
Lambert L. Ding | | October 12, 1959 | | Independent director, Audit Committee Member |
Michael C. Lee
| September 28, 1951
| Director
|
Yichin Lee | | January 4, 1961 | | Independent director, Audit Committee Member |
Alex Chen
| December 30, 1957
| Director
|
David Sun | | December 22, 1953 | | Director |
49
Fang Hsiung Cheng | | May 31, 1942 | | Director |
| George Sun | | April 4, 1951 | | Director |
| Lee Gai Poo | | February 28, 1957 | | Director |
| Yuan Chun Tang | | November 26, 1960 | | Director, Chief Executive Officer |
William Gong Wei
Cody Wu | | October 31, 196129, 1954 | | Chief Operating Officer |
Ivan Hsia | | August 14, 1973 | | Chief Financial Officer |
| Daphne Hsu | | August 12, 1962 | | Financial Controller |
Certain officers and directors of
the CompanyAPWC are or were also officers or directors of PEWC and/or PEWC affiliates, as described below. A brief professional summary for each member of
theour Board
of Directors and senior management is as follows:
Mr. Anson Chan has been an independent member of
the Company’sour Board
of Directors and a member and Chairman of
both the Audit Committee and
compensation committeeCompensation Committee since 2007. Mr. Chan is also a Managing Director of the Bonds Group of Companies and was
elected as a director of A SPAC II Acquisition Corp. in May 2022. Mr. Chan was a Senior Advisor to Elliott Associates from 2005 to 2008.
Mr. Andy C.C. Cheng was a member of the Company’s Board of Directors from 2004 to 2005 and was re-elected in 2007. Mr. Cheng was appointed as Chairman of the Board in 2009. From 1987 to 2003, Mr. Cheng served as Vice President in charge of procurement at PEWC. Mr. Cheng has been an Executive Vice President at PEWC since 2004 and Chairman of each of the investment divisions of PEWC, Tai Ho Investment Co., Ltd. and You Chi Investment Co., Ltd., since June 2008. Mr. Andy C.C. Cheng is not related to Mr. Fang Hsiung Cheng. Mr. Cheng currently He is also a member of PEWC’s Board of Directors.
Mr. Fang Hsiung Cheng has beenCertified Public Accountant in the U.S. and a member of the Company’s Board of Directors since 2006. He also serves as Assistant Vice President of PEWC. Mr. Fang Hsiung Cheng is not related to Mr. Andy C.C. Cheng.
Ms. Daphne Hsu has been Financial Controller of the Company since March 2005, prior to which she served as Financial Controller for ten yearsCharted Accountant in Taiwan and China at a Thomson SA joint venture.
Ontario, Canada.
Dr. Lambert Ding
was appointed March 17, 2011 ashas been an independent member of
theour Board
of Directors.since 2011. Dr. Ding is the president and CEO of Union Environmental Engineering Services and
before that, he was an
associate professorAssociate Professor at Yuan Ze University. Dr. Ding holds a Doctor of Philosophy degree from the University of Southern California,
awardedconferred in 1989. He is also a Registered Environment Assessor and holds several patents. Dr. Ding serves as a member of the
audit committeeAudit Committee and
compensation committee.Mr. Michael C. Lee has been a member of the Company’s Board of Directors since 2004 and is also Chief Executive Officer of PEWC and Chairman of Pacific USA Holdings, Ltd. Mr. Michael C. Lee is not related to Dr. Yichin Lee. Mr. Lee currently is also a member of PEWC’s Board of Directors.
Compensation Committee.
Dr. Yichin Lee has been an independent member of
the Company’sour Board
of Directors and served on the Audit Committee since
2007.2007, a member of PEWC's Board of Supervisors since 2022. He is also a member of the
compensation committee.Compensation Committee. Dr. Lee is the Managing Director of FCC
partners.Partners. Dr. Yichin Lee holds a doctorate degree in Resource Planning and Management from Stanford University. Dr. Yichin Lee is not related to Mr. Michael C.
Lee.Lee, a former Board member.
Mr.
Alex Chen hasChang Hung Sen was elected to the Board at the 2022 AGM and had been a member of
the Company’sour Board
of Directors since
2015.2021. He
also servedresigned his position as
Chief Marketing Officera director of APWC
from July 1, 2015 until December 31, 2019. Mr. Chen was first assigned to PEWC as Engineer, Assistant to General Manager, and later Manager of Quality Assurance Department from 1983 to 2008. He was appointed as Managing Director of Siam Pacific Electric Wire & Cable Co. Ltd. in Thailand from 2008 to 2015. Mr. Chen also serves as Vice President and General Division Manager of the General Sales Division of PEWC, and as a Director of the Taiwan Electric Research & Testing Center.effective October 22, 2022.
Mr. David Sun has been a member of
the Company’sour Board
of Directors since 2007. He also serves as
President of PEWC and Managing Director of Charoong
Thai WireThai. Mr. David Sun and
Cable Public Company Limited.50
Mr. George Sun are siblings.
Mr. Fang Hsiung Cheng has been a member of our Board since 2006. He also serves as Assistant Vice President of PEWC. Mr. Fang Hsiung Cheng is not related to Mr. Andy C.C. Cheng, a former Board member.
Mr. George Sun has been a member of our Board since 2021, and a member of PEWC’s Board of Directors since 2015. He also serves as Vice Chairman of PEWC. Mr. Sun started his own business in Silicon Valley in 1983 and successfully took the company public 10 years later. Mr. Sun is also a leading a venture capitalist and has been coaching startup companies for many years. Mr. George Sun and Mr. David Sun are siblings.
Mr. Lee Gai Poo has been a member of our Board since 2021. He also served as Vice President and General Plant Manager of PEWC from 2004 to 2008. He served as a member of APWC’s Board from 2006 to 2011. Mr. Lee Gai Poo has served as Executive Vice President of PEWC since 2021.
Mr. Yuan Chun Tang has been a member of
the Company’sour Board
of Directors since 2004 and Chief Executive Officer since 2005. Mr. Yuan served as
the Company’sAPWC’s Chairman from 2005 to 2009. He has also served as Chairman of PEWC since
2004 and has been the Director of Pacific Construction Corp. Ltd since 2002.2004. Mr. Yuan served as the Director of the Taiwan
Co-generation Corp.Cogeneration Corporation. from 2005 to 2008. Mr. Yuan has also
been theserved as Chairman of the Taiwan Electric Wire & Cable Industries Association since 2004. He has served
since 1998 as
a Supervisor of the
Supervisor to the Taipei Importers/Importers and Exporters Association
of Taipei and since 2004 as
well as thea Director of
the Chinese National Federation of Industries in
Taiwan since 1998 and 2004, respectively.Mr. William Gong Wei was appointed Chief Operating Officer effective April 1, 2013. He was first assigned to Charoong Thai Wire and Cable Pte. Co. Ltd. as Engineer, Assistant Plant Manager, and later consultant to the high voltage cable division from 1991 to 2000. Thereafter, Mr. Gong Wei left Charoong Thai to pursue other professional activities until he rejoined the Company in 2009. In April 2009 he was appointed as General Manager of Sigma Cable in Singapore. Mr. Gong Wei holds a master’s degree from the Asian Institute of Technology in Bangkok, Thailand.
Taiwan.
Mr. Ivan Hsia
was appointed ashas been Chief Financial Officer
effectiveof APWC since August 1, 2013. Mr. Hsia previously served as the Deputy CFO of
the Company.APWC. Prior to that, he served as the Senior Internal Audit Manager of
the Company.APWC. Before joining APWC, Mr. Hsia was the head of internal audit at Newegg.com in Los Angeles, CA, USA.
Mr. Cody Wu has served as Chief Operating Officer of APWC since May 1, 2022. From 1980 to 2006, Mr. Wu held several positions at PEWC, including Engineer, Quality Assurance Department; Section Manager, Production Department; and Factory Manager. He was appointed General Manager of Shanghai Yayang in September 2006 and appointed General Manager of PEWSC in April 2013.
Ms. Daphne Hsu has been Financial Controller of APWC since March 2005, prior to which she served as Financial Controller for ten years in Taiwan and China at a Thomson SA joint venture.
The
Company’s Common Shares currently trade on
the Global Markets tier of Nasdaq. Notwithstanding that, the Board of Directors is not composed of a majority of independent directors. The Company is relying upon theNasdaq's Capital Market tier. APWC utilizes Nasdaq's “controlled company exemption” that is available to issuers under the rules of
Nasdaq. In effect, theNasdaq as our Board is not composed of a majority of independent directors. The “controlled company exemption” provides that an issuer is not required to have its Board of Directors consist of a majority of independent directors if a shareholder, or two or more shareholders who constitute a group, have beneficial ownership of more than 50% of the issued and outstanding voting securities of the issuer.
As of December 31, 2022, PEWC
ownsowned and
controls,controlled, directly or indirectly,
75.4%approximately 80.96% of the issued and outstanding Common Shares of
the Company.APWC.
No service
contract existscontracts exist between any officers or
current directors
sitting on the Board and
the CompanyAPWC, or any of its subsidiaries, providing for benefits upon termination of employment.
The Company
APWC has no arrangements or understandings with any major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a director or member of senior management.
Diversity
Our Board diversity matrix is set out below.
| 6.2
| Audit Committee
| | | |
| Board Diversity Matrix (As of December 31, 2022) | |
| Country of Principal Executive Offices: | Taiwan |
| Foreign Private Issuer | Yes |
| Disclosure Prohibited under Home Country Law | No |
| Total Number of Directors | 8 |
| | | | | | | | | | | | | | | | | | | | | | | |
| Female | | Male | | Non-Binary | | Did Not Disclose Gender |
| Part I: Gender Identity | | | | | | | |
| Directors | — | | 8 | | — | | — |
| Part II: Demographic Background | | | | | | | |
| Underrepresented Individual in Home Country Jurisdiction | — | | — | | — | | — |
| LGBTQ+ | — | | — | | — | | — |
| Did Not Disclose Demographic Background | — | | 8 | | — | | — |
6.B. Compensation
The aggregate amount of compensation paid by us to all of APWC’s directors and members of its administrative, supervisory or management bodies (“Senior Management Members”), as a group, for services in all capacities during 2022 was approximately $2 million. The annual compensation of APWC’s directors and Senior Management Members on an individual basisfor services in all capacities is not required to be disclosed under the laws of Bermuda.
In 2022, the fee payable to each independent director was $30,000 per yearand the fee payable to each director who is a director or an executive officer of APWC or PEWC or any of their respective affiliates was $20,000 per year, together with, in each case, reimbursement of reasonable travel expenses for attendance at meetings of the Board or any of its committees.
No funds or provisions have been set aside or accrued by APWC or its subsidiaries to provide pension, retirement or similar benefits to directors or management except for government mandated programs. No equity compensation, including options, is included as part of the compensation for directors or Senior Management Members.
6.C. Board Practices
Audit Committee
The Audit Committee of the Board
of Directors primarily functions to assist the Board in its oversight of: (i) the reliability and integrity of accounting policies and financial reporting and disclosure practices and (ii) the establishment and maintenance of processes to ensure that there is compliance with all applicable laws, regulations and
companyCompany policy and an adequate system of internal
control,controls, management of business risks and
safeguardsafeguarding of assets.
The Audit Committee also oversees the appointment and remuneration of the Company's independent auditors.
The Audit Committee is composed of Mr. Anson Chan, Dr. Yichin Lee and Dr. Lambert Ding, with Mr. Chan serving as the chairman of the Audit Committee.
The Audit Committee, as currently constituted, complies with the requirements of Regulation 10A-3 of the Exchange Act and the corporate governance requirements of Nasdaq.
51
| 6.3
| Compensation Committee |
The Compensation Committee primarily functions to assist
theour Company in determining the compensation to be paid to the executive directors and certain members of the senior management of
theour Company. According to the charter under which it operates, the Compensation Committee is authorized to: (i) review and recommend to the Board, or determine, the annual salary, bonus, stock options, and other benefits, direct and indirect, of the senior management of
the CompanyAPWC and its principal operating subsidiaries; (ii) review new executive compensation programs, review on a periodic basis the operations of
theour Company’s executive compensation programs to determine whether they are properly coordinated, establish and periodically review policies for the administration of executive compensation programs, and take steps to modify any executive compensation programs that yield payments and benefits that are not reasonably related to executive performance; (iii) engage outside auditors and consultants to advise on market compensation; and (iv) establish and periodically review policies in the area of management perquisites.
The Compensation Committee is comprised of three independent directors, Mr. Anson Chan, Dr. Yichin Lee, and Dr. Lambert Ding.
In addition, Mr. Andy ChengThe Compensation Committee may invite members of management to its meetings as it deem appropriate in order to participate and
Mr. Yuan Chun Tang, the Company’s Chairman and Chief Executive Officer, respectively, serveprovide input in a non-voting
advisory capacity tocapacity. However, the Compensation
Committee.The aggregate amountCommittee meets regularly without members of compensation paid by the Company to allmanagement present and in no event is any officer present at a meeting of the Company’s directors and executive officers, as a group, for services in all capacities during 2019 was approximately $1.7 million. Compensation Committee where their compensation or performance is discussed or determined.
6.D. Employees
As of
MarchDecember 31,
2022, 2021, and 2020, our
directors and executive officers beneficially owned approximately 101,000 Common Shares representing approximately 0.7% of the issued and outstanding Common Shares. The annual compensation of its executive officers and directors on an individual basis is not a disclosure item under the laws and regulations applicable to the Company.In 2019, the fee payable to each independent director was $30,000 per year, together with, in each case, reimbursement of reasonable travel expenses for attendance at meetings of the Board of Directors or any of its committees. Director fees of 2019 for six directors who held positions at PEWC group this year was rescinded.
No funds or provisions have been set aside for providing compensation to directors or management except for government mandated programs.
The Company employed a total of 1,2271,207, 1,190, and 1,216 employees, as of December 31, 2019, of which about 14.2% were administrative and management personnel. Approximately 65.7% of employeespersonnel accounted for 13.6%, 13.8%, and 13.7%, respectively. The rest were located in the Thailand region, 18.3% in the North Asia region and 16.0% in the ROW region. Production workers areclassified as production personnel that usually organized into two 12-hour shifts or three 8-hour shifts to allowfor continuous factory operations.
The
Our Company’s employees located in the Thailand, North Asia, and ROW regions in terms of percentage were respectively 65%, 18.4%, and 16.6% as of December 31, 2022; 66.5%, 17.9%, and 15.6% as of December 31, 2021; 65.2%, 19.2%, and 15.6% as of December 31, 2020.
Our Company offers a range of employee benefits, which it believes are comparable to industry practice in its local markets. Such benefits include performance-based pay incentives, medical benefits, vacation, pension, housing for a small number of workers in Singapore and
in Thailand, and a small housing supplement
tofor other workers.
TheOur Company also provides training programs for its personnel
designateddesigned to improve worker productivity and occupational safety.
Presently, there is no group bonus, profit-sharing or stock option plan. However, some of
the Company’sAPWC’s subsidiaries have bonus or profit-sharing plans based on individual performance and
thefiscal year profitability of the particular subsidiary,
for the fiscal year, which plans are generally in accordance with
the industry practice and market conditions in
thetheir respective countries.
52
The
Our Company has several
defined benefit and defined contribution plans covering its employees in
Thailand, Australia, the PRC,
Singapore, Thailand, and
Singapore.Taiwan. Additionally,
theour Company has
as defined benefit
planplans in accordance with Thailand labor
law. Inlaws. Pursuant to these defined benefit plans, our Company pays a retiring employee at its Thai subsidiaries
the Company also pay a retiring employee from one to twenty-six times such employee’s salary rate during his or her final month, depending on the length of service. During
2019, the2022, our Company’s total expenses under this labor law were
$0.9$0.6 million. These
defined benefit plans are not funded and the amount is recognized and included in Employee Benefit Liabilities
in theon our Company’s balance sheet.
TheOur Company settles
itits obligations as and when employees retire. The accumulated benefit obligations under
this planthese plans amounted to
$11.7$8.9 million as at December 31,
2019.2022. For further information related to these employee benefit plans, see Note 21 of our consolidated financial statements referenced in Item 18 of this Annual Report.
Approximately
19%11% of the employees of Sigma Cable are members of the United Workers of Electronics & Electrical Industries, an employees’ union in Singapore. Under the terms of a collective agreement signed in June 2003,
theour Company is required to negotiate salary and wage increases yearly. All other worker benefits and employment terms are included in the collective agreement.
TheOur Company believes that approximately 100%
and 90.63% of the employees of
PEWS and Shanghai Yayang, respectively,PEWSC are members of their
respective Company Workers’
Unions.Union. These unions generally operate in accordance with related labor regulations in China. Approximately
15%16% of the employees of APEC are members of the Australian Workers’ Union. None of the employees of
theAPWC’s other operating subsidiaries
of the Company are members of a union.
The
Our Company has never experienced a strike or other disruption due to
a labor
disputes. Thedispute. Our Company considers its employee relations to be satisfactory and has not experienced
difficultiesdifficulty attracting and retaining qualified employees.
ITEM 7:
| MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
A
6.E. Share Ownership
The Common Shares beneficially owned by the persons listed in “Item 6. Directors, Senior Management and Employees – 6.B. Compensation” are disclosed in “Item 7. Major Shareholders and Related-Party Transactions – 7.A. Major Shareholders.”
No equity compensation, including options, is included as part of the compensation for directors or senior management.
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
7.A. Major Shareholders
As of December 31, 2022, there were 20,616,227 Common Shares issued and outstanding, excluding a total of 11,100
treasury shares. In January 2022, APWC distributed, at no charge to its shareholders, non-transferable subscription rights to purchase additional Common Shares
are now issued but not outstandingto all of its shareholders. This rights offering expired on January 31, 2022, and
are booked as treasury shares. On August 21, 2015,was oversubscribed. Pursuant to this rights offering, PEWC and
its two subsidiaries that hold Common Shares, Moon View Ventures Limited
a BVI company and
wholly-owned subsidiary of PEWC,Pacific Holdings Group, acquired
1,355,415additional Common Shares
that were held indirectly byas follows: (i) PEWC, which exercised 1,410,739 basic subscription rights at an investment of $846,443, was issued 693,806 additional Common Shares; (ii) Moon View, which exercised 7,661,235 basic subscription rights and exercised over-subscription rights for a
private equity investor group. In connection with the saletotal investment of
thoseapproximately $5,975,389, was issued 4,897,859 additional Common
Shares, the parties terminatedShares; and (iii) Pacific Holdings, which exercised 1,358,795 basic subscription rights at an
Amended and Restated Shareholders’ Agreement, which termination benefited the Company by reasoninvestment of
the elimination of certain U.S. tax indemnification obligations of the Company (and PEWC) in favor of the private equity investor, and the termination of the Company’s obligation to maintain effective a shelf registration statement on Form F-3, covering the$815,277, was issued 668,259 additional Common
Shares held by the private equity investor.Shares. As a result of
that transaction, PEWC held, and it continues to hold, approximately 75.4% of thethis rights offering, APWC’s issued and outstanding
Common Shares. The remaining approximately 24.6%shares increased from 13,819,669 to 20,616,227 shares, and PEWC’s aggregate ownership of
the issued and outstandingour Common Shares
are presentlyincreased from 10,430,769 to 16,690,693 shares, representing an increase in percentage ownership from 75.48% to 80.96%. While the remaining publicly traded
Common Shares increased from 3,388,900 to 3,925,534 shares, the ownership percentage in
the U.S. and are currently listed on the Nasdaq Global Markets tier under the trading symbol “APWC”APWC represented by such Common Shares decreased from 24.52% to 19.04%.
The following table sets forth certain information regarding beneficial ownership of the Company’s Common Shares as of March 31, 20202023 by (i) all persons who are known to the CompanyAPWC to own beneficially more than five percent of the Common Shares of the Company and (ii) theAPWC’s executive officers (Senior Management Members) and directors of the Company as a group. The information set forth in the following table is derived from public filings made by holders and information obtained from directors and officers. The voting rights attaching to the Common Shares below are the same as those attaching to all other Common Shares.
| Identity of Person or Group | Number of Shares | | Percent of Class | | Identity of Person or Group | Number of Shares | | Percent of Class |
Pacific Electric Wire & Cable Co., Ltd.(1) | | 10,430,769 | | | 75.417 | % | |
LONSIN Capital Limited | | 714,170 | | 5.170 | % | |
Directors and Officers of the Company | | 98,954 | | 0.716 | % | |
| Pacific Electric Wire & Cable Co., Ltd.(1) | | Pacific Electric Wire & Cable Co., Ltd.(1) | 16,690,693 | | 80.959 | % |
| Directors and Executive Officers (Senior Management Members) of APWC | | Directors and Executive Officers (Senior Management Members) of APWC | 94,834 | | 0.460 | % |
(1)
| PEWC owns 1,410,739 shares directly and owns its remaining shares indirectly, as a result of PEWC’s control of its direct wholly-owned subsidiary, Moon View Ventures Limited, a BVI company, which beneficially owns 7,661,235 Common Shares, and as a result of PEWC’s control of its indirect wholly-owned subsidiary, Pacific Holdings Group, a Nevada corporation, which beneficially owns 1,358,795 Common Shares.
|
_____________________________53
The Company has 6,166,154(1)PEWC beneficially owns 2,104,545 shares directly and the remaining shares indirectly, as a result of (i) PEWC's control of its wholly-owned subsidiary Moon View Ventures Limited, a BVI company, which owns of record 12,559,094 Common Shares that were registered, of which 3,388,900 Common Shares are publicly-traded on the Nasdaq Global Market tier, which represents approximately 24.6% of the issued and outstanding Common Shares. With regard to the remaining 2,777,254 such Common Shares, 2,766,154 Common Shares are held by PEWC and its subsidiaries, and 11,100 Common Shares are held by the Company in treasury, and all of those shares are subject to trading restrictions under Rule 144 promulgated under the U.S. Securities Act of 1933. Other than (i) the approximately 98,954 Common Shares held by directors or officers who are not resident in the United States, (ii) the 2,766,154 registered securities held indirectly by PEWC and (iii) the 714,170 Common Shares reported to be held beneficially by Lonsin Capital Limited, a company organized under the laws of the United Kingdom (“Lonsin”), and by twoPEWC's control of its managers who reportedly control managed accountsindirect wholly-owned subsidiary Pacific Holdings Group, a Nevada corporation, which owns of customers of Lonsin, the Company believes that substantially all of its registered securities are held by U.S. residents (other than the 11,100record 2,027,054 Common Shares held by the Company in treasury). The Company has no means to definitively confirm that belief, which is based upon a review of the share registers maintained by the Company’s Bermuda transfer agent and U.S. transfer agent and the addresses provided by the record holders. Shares.
Based upon a review of the records of the Company’sAPWC’s U.S. transfer agent, including a list of non-objecting beneficial holders, (“NOBOs”), the Companyas of December 31, 2022, APWC believes there are substantially more than 400 beneficialrecord holders that are resident in the United States, representing approximately 18% of the Common Shares outstanding as of such date, although that constitutes only the Company’sAPWC’s best estimate of the number of U.S. beneficial holders.
| 7.2
| Related Party Transactions
|
The
7.B. Related Party Transactions
Our Company
incursengages in transactions in the ordinary course
trade payablesof business with PEWC,
including the purchase of certain raw materials and the distribution of PEWC products in
connection with copper purchases undervarious countries in the Asia Pacific region. These transactions are governed by the Composite Services Agreement
dated November 7, 1996 between APWC and PEWC (the “Composite Services Agreement” or “CSA”), which our Company has renewed annually, at its option. The Composite Services Agreement contains provisions that define the relationship and the
sale byconduct of the
respective businesses of our Company
of Distributed Products that are manufactured by PEWC.As of December 31, 2019 the Company, including its subsidiaries, had a net principal balance outstanding of $1.9 million borrowed fromand PEWC and subsidiaries of PEWC. This short-term indebtedness is payableconfers certain preferential benefits on our Company. For a demand basis and does not accrue interest.
The Company used the proceeds from eachdescription of the related party loans described above for working capital and purchases of capital equipment. The terms of borrowing by APWC or any of its subsidiaries from PEWC are on terms at least as favorable than terms available in arms-length transactions with unaffiliated parties.
Composite Services Agreement, see Item 10.C.
Under the terms of the Composite Services Agreement,
APWCour Company pays a management fee to PEWC in connection with the secondment, or temporary assignment and relocation, of certain PEWC managers to
APWC facilities in Thailand and China.our Company’s operating units. The assigned managers assist
APWCour Company in implementing the results of certain research and development conducted by PEWC and made available by PEWC to
theour Company under the terms of the Composite Services Agreement. The assigned managers also assist
APWCour Company in the procurement of raw materials, primarily copper, which is also provided for under the Composite Services Agreement. The
amount of such annual management fee was approximately
$199 thousand$172 in
2019.From time2022, $153 in 2021 and $133 in 2020.
On July 10, 2020, APWC and PEWC entered into a secured loan agreement pursuant to timewhich in August 2020 we have engagedborrowed the principal amount of $6 million from PEWC, at a fixed 3% interest rate and secured by a pledge of our
Company’s 98.3% ownership stake in a varietySigma Cable. Our Company used the proceeds from the Secured Loan for working capital and purchases of capital equipment. In June 2021, the loan was repaid in full to PEWC, and the loan facility was terminated.
To the extent that transactions
withoccur in the future between our
affiliates. We generally conductCompany and PEWC, or affiliates of PEWC, other than under the Composite Services Agreement, such transactions
with our affiliateswill be entered into on an
arm’s-length basis. The sales and purchase prices with related parties are determined through negotiation, generally basedarm’s length basis on
the quoted copper price on the LME plus a certain premium.terms no less favorable than those available from unaffiliated third parties.
Additional details regarding related party balances as of December 31,
20192022 and related party transactions
including copper purchases from PEWC, are disclosed in our audited consolidated financial statements referenced in
Item 18:“Item 18. Financial Statements.
” Please refer to Note 24 of our consolidated financial statements presented herewith.
54
ITEM 8:
| FINANCIAL INFORMATION
|
| A.
| Consolidated Statements and Other Financial Information
|
| 8.1
| Consolidated Statements
|
ITEM 8: FINANCIAL INFORMATION8.A. Consolidated Statements and Other Financial Information
Consolidated Statements
See Item 18: Financial Statements
There are currently no material proceedings in which any director, senior manager, or affiliate is adverse to the CompanyAPWC or has an adverse material interest. There are no actual or pending legal proceedings to which the CompanyAPWC is, or is likely to become, a party which may reasonably be expected to have, or have had in the recent past, a material effect on theour Company’s condition (financial or otherwise) or results of operations.
In November 2016,
Under our Bye-Laws, our Board may from time to time declare dividends or distributions out of contributed surplus to be paid to the Company announcedshareholders according to their rights and interests. With the sanction of a shareholders resolution, our Board may determine that itsany dividend may be paid by distribution of specific assets, including paid-up shares or debentures of any other company. Our Board may also pay any fixed cash dividend which is payable on any of Directors hadthe Common Shares half-yearly or on other dates, whenever APWC’s position, in the opinion of our Board, justifies such payment.
While our Board approved the implementation of a dividend policy as part ofin 2016 with the Company's ongoing commitment to increasing shareholder value and return on investment. Thestated goal of the dividend policy is to paypaying annual cash dividends of at least 25% of the Company'sAPWC’s net post-tax audited consolidated profits attributable to shareholders, to be paid on an annual basis in cash, if and when available for distribution. In accordance with its dividend policy, on November 30, 2018, the Company paid a cash dividend to shareholders of record as of September 14, 2018 in the amount of $0.08 per Common Share. In December 2019, the Company’sour Board of Directors determined not to pay a dividend forsince 2019, given that the Company hadtaking into account our Company’s funding requirementsneeds and unsatisfied business performance. At this time,
we do not anticipate paying any dividends, or otherwise making any distributions or transfers, to our shareholders in 2023. As a holding company,
the Company’sour ability to pay dividends, as well as to meet
itsour other obligations, depends upon the amount of distributions, if any, received from
the Company’sour operating subsidiaries and other holdings and investments.
The Company’sOur operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to
the Company.APWC. Those restrictions may also affect
the Company’sAPWC’s ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary.
In addition, the ability of the Company'sour operating subsidiaries to make distributions to APWC will depend upon a number of factors, including operating results, capital requirements, expansion plans, business prospects, obligations in respect of non-recurring items, debt covenants and other factors that may arise from time to time. The Company cannot provideThere can be no guarantee that APWC will pay any unconditional assurances to holders of Common Shares with regard to the Company's ability to pay further dividends in accordance with the Company's dividend policy.future.
8.B. Significant Changes
Please see Note 29 (Subsequent Events) to the consolidated financial statements referenced in Item 18 hereof for information on recent material events, which
Note contains information regarding
recent development in respectthe declaration of
a cash dividend by the
riskBoard of
the delistingDirectors of
our Common Shares from Nasdaq and in respect of the material adverse effects of COVID-19 on the Company, its business, operations, financial condition, employees and customers.Charoong Thai. There have been no material or significant changes in the Company’s affairs since the end of the fiscal year ended December 31,
20192022 that have not been described herein or in such Note 29.
ITEM 9:
| THE OFFER AND LISTING
|
ITEM 9: THE OFFER AND LISTING
The
Company’s Common Shares currently trade on
the Nasdaq
Global MarketsCapital Market tier under the
trading symbol “APWC”. The Common Shares are not listed on any other exchanges or otherwise publicly traded within or outside the United States.
55
ITEM 10:
| ADDITIONAL INFORMATION
|
ITEM 10: ADDITIONAL INFORMATION
10.A. Share Capital
As of December 31, 2019, and as of the date of the filing of this Annual Report,2022, there were and there are 13,830,76920,627,327 Common Shares issued, with 13,819,66920,616,227 Common Shares issued and outstanding and 11,100 Common Shares held in Treasury. treasury.
On January 14, 2022, APWC distributed, at no charge to the holders of its Common Shares, subscription rights to purchase additional Common Shares. The subscription rights were issued to holders of Common Shares as of 5:00 p.m., Eastern Standard Time, on January 7, 2022, the record date for the rights offering, at a ratio of one subscription right per Common Share. Each subscription right entitled its holder to invest $0.60 towards the purchase of Common Shares at a price per share equal to the subscription price (the “basic subscription right”). The subscription price in the rights offering was $1.22 per Common Share. In accordance with the terms of the rights offering, this subscription price was equal to 90% of the lower of (1) the volume weighted average price per common share on the Nasdaq Capital Market over the five consecutive trading days through and including the expiration date of the rights offering, and (2) the closing price per common share on the Nasdaq Capital Market on the expiration date of the rights offering. The pricing formula was intended to ensure that the subscription price was at least a 10% discount to the closing price per Common Share on the expiration date of the rights offering.
The rights offering included an over-subscription privilege, which permitted each rights holder that exercised its subscription rights in full the option to purchase additional Common Shares that remained unsubscribed at the expiration of the rights offering. The over-subscription privilege was subject to the availability and allocation of shares among holders exercising their over-subscription privilege. The Common Shares issued as part of the over-subscription privilege were allocated pro-rata among shareholders who exercised their over-subscription rights based on the number of shares each such shareholder owned on the record date, taking into account the investment amount that each such shareholder allocated toward over-subscription rights.
The rights offering expired on January 31, 2022, and on February 2, 2022, APWC announced the successful completion of the rights offering, which was oversubscribed. In the rights offering, APWC issued and sold 6,796,558 additional Common Shares pursuant to the exercise of subscription rights, raising gross proceeds of approximately $8.3 million before any expenses of the rights offering.
No capital
stock of
the CompanyAPWC is under option or agreed conditionally or unconditionally to be put under option.
The CompanyAPWC does not have any classes of capital stock other than
its Common Shares.
| 10.2
| Memorandum of Association and Bye-Laws
|
10.B. Memorandum of Association and Bye-Laws
General
The following is a summary of provisions of Bermuda law and APWC’s organizational documents, including APWC’s Memorandum of Association and Bye-Laws. We refer you to APWC’s Memorandum of Association and Bye-Laws, copies of which have been filed with the SEC. You are urged to read these documents in their entirety for a complete understanding of the terms thereof.
The objects under which APWC is formed and incorporated under its Memorandum of Association are:
(1)to carry on business as a holding company and to acquire and hold shares, stocks, debenture stocks, bonds, mortgages, obligations and securities of any kind issued or guaranteed by any company, corporation or undertaking of whatever nature and wherever constituted or carrying on business, and shares, stock, debentures, debenture stock, bonds, obligations and other securities issued or guaranteed by any government, sovereign ruler, commissioners, trust, local authority or other public body, whether in Bermuda or elsewhere, and to vary, transpose, dispose of or otherwise deal with from time to time as may be considered expedient any of the Company’s investments for the time being;
(2)to acquire any such shares and other securities as are mentioned in the preceding paragraph by subscription, syndicate participation, tender, purchase, exchange or otherwise and to subscribe for the same, either conditionally or otherwise, and to guarantee the subscription thereof and to exercise and enforce all rights and powers conferred by or incident to the ownership thereof;
(3)to co-ordinate the administration, policies, management, supervision, control, research, planning, trading and any and all other activities of any company or companies now or thereafter incorporated or acquired which may be or may become a company, wherever incorporated, which is or becomes a holding company or a subsidiary of, or affiliated with, the Company within the meanings respectively assigned to those terms in The Companies Act 1981, or with the prior written approval of the Minister of Finance, any company or companies now or hereafter incorporated or acquired with which the Company may be or may become associated;
(4)packing of goods of all kinds;
(5)buying, selling and dealing in goods of all kinds;
(6)designing and manufacturing of goods of all kinds;
(7)mining and quarrying and exploration for metals, minerals, fossil fuels and precious stones of all kinds and their preparation for sale or use;
(8)exploring for, the drilling for, the moving, transporting and refining petroleum and hydro carbon products including oil and oil products;
(9)scientific research including the improvement, discovery and development of processes, inventions, patents, and designs and the construction, maintenance and operation of laboratories and research centers;
(10)land, sea and sir undertakings including the land, ship and air carriage of passengers, mails and goods of all kinds;
(11)ships and aircraft owners, managers, operators, agents, builders and repairers;
(12)acquiring, owning, selling, chartering, repairing or dealing in ships and aircraft;
(13)travel agents, freight contractors and forwarding agents;
(14)dock owners, wharfingers, warehousemen;
(15)ship chandlers and dealing in rope, canvas oil and ship stores of all kinds;
(16)all forms of engineering;
(17)acquiring by purchase or otherwise and holding as an investment inventions, patents, trademarks, trade names, trade secrets, designs and the like;
(18)buying, selling, hiring, letting and dealing in conveyances of any sort;
(19)employing, providing, hiring out and acting as agent for artists, actors, entertainers of all sorts, authors, composers, producers, directors, engineers and experts or specialists of any kinds;
(20)to acquire by purchase or otherwise hold, sell, dispose of and deal in real property situated outside Bermuda and in personal property of all kinds wherever situated; and
(21)to enter into any guarantee contract of indemnity or suretyship and to assure, support or secure with or without consideration or benefit the performance of any obligations of any person or persons and to guarantee the fidelity of individuals filing or about to fill situations of trust or confidence.
For a detailed description of theour Company’s principal activities, see Section 4.1: “History and Development of the Business.”Item 4 above. Pursuant to the Company’sAPWC’s Bye-Laws, the Board of Directors consists of a single class of directors, each director has one vote on all matters put to the Board, and a quorum consists of a majority of the members of the Board of Directors then in office.
| 10.2.2
| Description of Shareholder Rights Attaching to OurDescription of Shareholder Rights Attaching to the Common Shares
|
The Company
APWC was incorporated in Bermuda on September 19, 1996 under the Companies Act. The rights of
ourAPWC’s shareholders are governed by Bermuda law and
our memorandumAPWC’s Memorandum of
associationAssociation and Bye-Laws.
Our
APWC’s authorized share capital as of December 31, 20192022 was $500,000$0.5 million consisting of 50,000,000 Common Shares, par value $0.01 per share, ofshare. Of which, as of December 31, 2019,2022, and as of the date of the filing of this Annual Report, there were and are 13,830,76920,627,327 Common Shares issued of which 13,819,66920,616,227 Common Shares are issued and outstanding and eligible to vote. There arewere 11,100 Common Shares that are issued (but not outstanding and not currently eligible to vote) and held as treasury shares by the Company.APWC.
•Holders of the Common Shares have no preemptive, redemption, conversion or sinking fund rights.
•Holders of the Common Shares are entitled to one vote per share on all matters submitted to a poll vote of holders of Common Shares and do not have any cumulative voting rights.
•In the event of ourAPWC’s liquidation, dissolution or winding-up and subject to any alternative resolution that may be pursued by ourAPWC’s shareholders, the holders of Common Shares are entitled to share ratably in ourAPWC’s assets, if any, remaining after the payment of all ourof APWC’s debts and liabilities.
Our•APWC’s issued and outstanding Common Shares are fully paid and non-assessable.
•Additional authorized but unissued Common Shares, and issued shares held in treasury, may be issued or conveyed by the Board without the approval of the shareholders.
The holders of Common Shares will receive such dividends, if any, as may be declared by the Board of Directors out of funds legally available for such purposes. WeAPWC may not declare or pay a dividend, or make a distribution out of contributed surplus, if there are reasonable grounds for believing that:
we are,•APWC is, or after the payment would be, unable to pay ourits liabilities as they become due; or
•the realizable value of ourAPWC’s assets after such payment or distribution would be less than the aggregate amount of ourits liabilities.
Share Capital
The following is a summary of provisions of Bermuda law and our organizational documents, including our memorandum of association and Bye-Laws. We refer you to our memorandum of association and our Bye-Laws, copies of which have been filed with the SEC. You are urged to read these documents in their entirety for a complete understanding of the terms thereof.
56
OurAPWC’s authorized capital consists of one class of Common Shares. Under ourAPWC’s Bye-Laws, our Board of Directors has the power to issue any authorized and unissued shares on such terms and conditions as it may determine. Any shares or class of shares may be issued with such preferred, deferred, qualified or other special rights or any restrictions with regard to such matters, whether in regard to dividend, voting, return of capital or otherwise, as weAPWC may from time to time by resolution of the shareholders prescribe, or in the absence of such shareholder direction, as the Board of Directors may determine. This provision in the Bye-Laws could be used to prevent a takeover attempt, or to make a takeover attempt prohibitively expensive, and thereby preclude shareholders from realizing a potential premium over the market value of their shares.
Generally, under Bermuda law and
ourAPWC’s Bye-Laws, questions brought before a general meeting are decided by a simple majority vote of shareholders present or represented by proxy, with no provision for cumulative voting. Matters will be decided by votes cast by way of voting cards, proxy cards or a show of hands unless a poll is demanded.
For purposes of determining the number of votes cast with respect to any proposal, only those votes cast “for” or “against” shall be included. An “abstain” vote will not count as votes cast on any such proposal.
If a poll is demanded, each shareholder who is entitled to vote and who is present in person or by proxy has one vote for each Common Share entitled to vote on such question. A poll may only be demanded under the Bye-Laws by:
•the chairman of the meeting;
•at least three shareholders present in person or represented by proxy;
•any shareholder or shareholders present in person or represented by proxy and holding between them not less than one-tenth of the total voting rights of all shareholders having voting rights; or
•a shareholder or shareholders present in person or represented by proxy holding Common Shares conferring the right to vote on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all Common Shares.
Unless the Board of Directors otherwise determines, no shareholder shall be entitled to vote at any general meeting unless all calls or other sums presently payable by that shareholder in respect of all shares held by such shareholder have been paid.
Under Bermuda law, a company may declare and pay dividends unless there are reasonable grounds for believing that the company is, or would, after the payment, be unable to pay its liabilities as they become due or that the realizable value of the company’s assets would thereby be less than its liabilities.
Under
ourAPWC’s Bye-Laws, the Board may from time to time declare dividends or distributions out of contributed surplus to be paid to the shareholders according to their rights and interests. With the sanction of a shareholders resolution, the Board
of Directors may determine that any dividend may be paid by distribution of specific assets, including paid-up shares or debentures of any other company. The Board
of Directors may also pay any fixed cash dividend which is payable on any of
ourthe Common Shares half-yearly or on other dates, whenever
ourAPWC’s position, in the opinion of the Board,
of Directors, justifies such payment.
Dividends, if any, on
ourthe Common Shares will be at the discretion of
ourthe Board,
of Directors, and will depend on our future operations and earnings, capital requirements, surplus and general financial condition as our Board
of Directors may deem relevant.
57
| 10.2.6
| Purchases by the CompanyPurchases by APWC of its own Common Shares
|
Under Bermuda law and as authorized by
the Company’s memorandumAPWC’s Memorandum of
association, weAssociation and Bye-Laws, APWC may purchase
ourits own Common Shares out of the capital paid up on the Common Shares in question or out of funds that would otherwise be available for dividend or distribution or out of the proceeds of a fresh issue of Common Shares made for the purposes of the purchase.
WeAPWC may not purchase
ourits Common Shares if, on the date on which the purchase is to be effected, there are reasonable grounds for believing that
the CompanyAPWC is, or after the purchase would be, unable to pay its liabilities as they become due.
However, to the extent that any premium is payable on the purchase, the premium must be provided out of the funds of the CompanyAPWC that would otherwise be available for dividend or distribution or out of the Company’sAPWC’s share premium account.
Our
APWC’s Bye-Laws generally do not provide the holders of ourits Common Shares preemptive rights in relation to any issues of Common Shares by usAPWC or any transfer of ourAPWC’s shares.
| 10.2.8
| Variation of Rights |
We
APWC may issue more than one class of shares and more than one series of shares in each class. The rights attached to any class of shares may be altered or abrogated either:
•with the consent in writing of the holders of more than fifty percent of the issued shares of that class; or
•pursuant to a resolution of the holders of such shares.
The Bye-Laws provide that the necessary quorum shall be two or more shareholders present in person or by proxy holding a majority of shares of the relevant class in issue and entitled to vote. The Bye-Laws specify that the creation or issuance of shares ranking pari passu with existing shares will not, subject to any statement to the contrary in the terms of issuance of those shares or rights attached to those shares, vary the special rights attached to existing shares.
| 10.2.9
| Transfer of Common Shares |
Subject to the “Transfer Restrictions” section below, a shareholder may transfer title to all or any of his shares by completing an instrument of transfer in the usual common form or in such other form as the Board of Directors may approve. The form of transfer is required to be signed by or on behalf of the transferor and also the transferee where any share is not fully paid. The transferor shall be deemed to remain the holder of the shares until the name of the transferee is entered in the register of members of the Company.APWC.
| 10.2.10
| Transfer Restrictions |
The Board of Directors may, in its absolute discretion and without assigning any reason therefor, decline to register any transfer of any share which is not a fully paid share. The Board of Directors may also refuse to register an instrument of transfer of a share unless:
•the instrument of transfer is duly stamped, if required by law, and lodged with the Company;
•the instrument is accompanied by the relevant share certificate for the shares to which it relates, and such other evidence as the Board of Directors shall reasonably require to show the right of the transferor to make the transfer;
•the instrument of transfer is in respect of only one class of shares;
•where applicable, the permission of the Bermuda Monetary AuthoritywithAuthority with respect thereto has been obtained; and
•subject to the Companies Act, the Bye-Laws and any directions of the Board from time to time in force, the secretary of APWC may exercise the powers and discretions of the Board with respect to: (i) the transfer of shares by a shareholder by way of an instrument of transfer in the usual common form and (ii) sending to a notice of refusal to register a transfer of shares where the Board declines to register such transfer, within three months after the date on which the instrument of transfer was lodged.
58
| •
| subject to the Companies Act, the Bye-Laws and any directions of the Board of Directors from time to time in force, the secretary of the Company may exercise the powers and discretions of the Board of Directors with respect to: (i) the transfer of shares by a shareholder by way of an instrument of transfer in the usual common form and (ii) sending to a notice of refusal to register a transfer of shares where the Board of Directors declines to register such transfer, within three months after the date on which the instrument of transfer was lodged.
|
In accordance with the provisions of the Exchange Control Act 1972, as amended, and related regulations of Bermuda, the permission of the Bermuda Monetary Authority (the “BMA”“BMA”) is required for all issuances and transfers of shares (which includes ourthe Common Shares) of Bermuda companies to or from a non-resident of Bermuda for exchange control purposes, other than in cases where the BMA has granted a general permission. The BMA, in its notice to the public dated June 1, 2005, has granted a general permission for the issue and subsequent transfer of any securities of a Bermuda company from and/or to a non-resident of Bermuda for exchange control purposes for so long as any “Equity Securities” of the company (which include ourthe Common Shares) are listed on an “Appointed Stock Exchange” (which would include Nasdaq). In granting the general permission the BMA accepts no responsibility for our financial soundness or the correctness of any of the statements made or opinions expressed herein.
Accordingly, ourthe Common Shares benefit from a general permission for free transferability for all transfers between persons who are not resident in Bermuda for exchange control purposes, for as long as such Common Shares remain listed on an appointed stock exchange. In the event that ourthe Common Shares are delisted from Nasdaq, it will be necessary to obtain the prior permission of the BMA to transfer such Common Shares to any transferee, subject to any applicable general permissions issued by the BMA.
| 10.2.11
| Transmission of Shares |
In the event of the death of a shareholder, the survivor or survivors, where the deceased shareholder was a joint holder, and the estate representative, where the deceased shareholder was sole holder, shall be the only persons recognized by usAPWC as having any title to the shares of the deceased. “Estate representative” means the person to whom probate or letters of administration has or have been granted in Bermuda, or failing any such person, such other person as the Board of Directors may in its absolute discretion determine to be the person recognized by usAPWC for this purpose.
| 10.2.12
| Disclosure of Interests
|
Disclosure of Interests
Under the Companies Act, a director who has an interest in a material contract or a proposed material contract, or a 10% or more interest (directly or indirectly) in an entity that is interested in a contract or proposed contract or arrangement with us, is obligated to declare the nature of such interest at the first opportunity at a meeting of the Board of Directors, or by writing to the Board of Directors. If the director has complied with the relevant sections of the Companies Act and the Bye-Laws with respect to the disclosure of his interest, the director may vote at a meeting of the Board of Directors or a committee thereof on a contract, transaction or arrangement in which that director is interested, in which case his vote shall be counted and he shall be taken into account in ascertaining whether a quorum is present.
| 10.2.13
| Rights in Liquidation |
Under Bermuda law, in the event of liquidation or winding-up of a company, after satisfaction in full of all claims of creditors and subject to the preferential rights accorded to any series of preferred shares, the proceeds of such liquidation or winding-up are distributed among the holders of shares in accordance with a company’s bye-laws.
59
Under ourAPWC’s Bye-Laws, if we areAPWC is wound up, the liquidator may, pursuant to a resolution of the shareholders and any approval required by the Companies Act, divide among the shareholders in cash or other assets the whole or part of ourAPWC’s assets, whether such assets shall consist of property of the same kind or not, and may for such purposes set such values as such liquidator deems fair upon any property to be divided and may determine how such division shall be carried out as between the shareholders.
| 10.2.14
| Meetings of Shareholders |
Under Bermuda law, a company, unless it elects to dispense with the holding of annual general meetings, is required to convene at least one general meeting per calendar year. The directors of a company, notwithstanding anything in such company’s bye-laws, shall, on the requisition of the shareholders holding at the date of the deposit of the requisition not less than one-tenth of the paid-up capital of the company carrying the right of vote, duly convene a special general meeting.
OurAPWC’s Bye-Laws provide that the Board
of Directors may, whenever it thinks fit, convene a special general meeting.
Bermuda law requires that shareholders be given at least five days’ notice of a meeting of
the Company. OurAPWC. APWC’s Bye-Laws extend this period to provide that not less than 20 days’ written notice of a general meeting must be given to those shareholders entitled to receive such notice. The accidental omission to give notice to or non-receipt of a notice of a meeting by any person does not invalidate the proceedings of a meeting.
Our
APWC’s Bye-Laws state that no business can be transacted at a general meeting unless a quorum of at least two shareholders representing a majority of the issued shares of
the CompanyAPWC are present in person or by proxy and entitled to vote.
Under ourAPWC’s Bye-Laws, notice to any shareholders may be delivered either personally or by sending it through the post, by airmail where applicable, in a pre-paid letter addressed to the shareholder at his address as appearing in the share register or by delivering it to, or leaving it at, such registered address. Any notice sent by post shall be deemed to have been served seven (7) days after dispatch. A notice of a general meeting is deemed to be duly given to the shareholder if it is sent to him by cable, telex or tele-copier or other mode of representing or reproducing words in a legible and non-transitory form and such notice shall be deemed to have been served twenty-four (24) hours after its dispatch.
| 10.2.15
| Access to Books and Records and Dissemination of Information |
Under Bermuda law, members of the general public have the right to inspect the public documents of a company available at the office of the Bermuda Registrar of Companies. These documents include the memorandum of association and any amendment to the memorandum of association.
Under Bermuda law, the minutes of shareholder meetings will be open for inspection by any shareholder or director without charge for not less than two hours during business hours each day, subject to any reasonable restrictions that
weAPWC may impose. The shareholders shall be entitled to receive a copy of every balance sheet and statement of income and expenditure before a general meeting as required under the Bye-Laws.
Under ourAPWC’s Bye-Laws, unless the Board otherwise determines, the register of shareholders of the CompanyAPWC is required to be open for inspection between 10:00 a.m. and 12:00 noon each working day without charge to members of the general
public. A company is required to maintain its share register in Bermuda but may, subject to the provisions of the Companies Act, establish a branch register outside of Bermuda.
We haveAPWC has established a branch register with
ourAPWC’s transfer agent, Computershare Limited, which is based in Jersey City, New Jersey.
Under Bermuda Law, a company is required to keep at its registered office a register of its directors and officers that is open for inspection for not less than two hours in each day by members of the public without charge. Under
ourAPWC’s Bye-Laws, the register of directors and officers is available for inspection by the public between 10:00 a.m. and 12:00 noon every working day.
60
Bermuda law does not provide a general right for shareholders to inspect or obtain copies of any other corporate records, except for the Bye-Laws of the Company.APWC.
| 10.2.16
| Election or Removal of Directors |
The Bye-Laws provide that the number of directors will be such number, not less than two, as
ourAPWC’s shareholders by resolution may from time to time determine. A director will serve until re-elected or his successor is appointed at the next annual general meeting or his prior removal in the manner provided by the Companies Act or the Bye-Laws. There is no requirement under Bermuda law,
the Company’sAPWC’s memorandum of association or its Bye-Laws that a majority of
the Company’sAPWC’s directors be independent.
The Bye-Laws provide that each director shall have one vote on all matters presented to the Board for a vote.
At the Annual General Meeting held on August 30, 2019, all nine directors then in office were re-elected.The shareholders may by resolution determine that one or more vacancies in the Board
of Directors shall be deemed casual vacancies for the purposes of the Bye-Laws. The Board, so long as a quorum of directors remains in office, shall have the power at any time and from time to time to appoint any individual to be a director so as to fill a casual vacancy. The shareholders may approve the appointment of alternate directors or may authorize the Board to appoint them. Directors may also appoint and remove their own alternates. At the Annual General Meeting held on August
31, 2018,30, 2019, the shareholders approved of the total number of directors.
We
APWC may, in a special general meeting called for this purpose, remove a director, provided notice of such meeting is served upon the director concerned not less than fourteen days before the meeting and he shall be entitled to be heard at that meeting.
The office of a director will be vacated in the event of any of the following:
•if he resigns his office by notice in writing to be delivered to ourAPWC’s registered office or tendered at a meeting of the Board of Directors;
•if he becomes of unsound mind or a patient for any purpose under any statute or applicable law relating to mental health and the Board of Directors resolves that his office is vacated;
•if he becomes bankrupt or enters into a general settlement with his creditors;
•if he is prohibited by law from being a director; or
•if he ceases to be a director by virtue of the Companies Act or is removed from office pursuant to the Bye-Laws.
Directors’ remuneration is determined by APWC’s shareholders during general meetings. Directors may also be paid all reasonable travel, hotel, and other expenses properly incurred in attending meetings of the Board, meetings of any committee appointed by the Board, general meetings of the shareholders of APWC, or any meetings in connection with the business of APWC or their duties as Directors generally. There are no age limit requirements regarding retirement or non-retirement of directors. Holding shares is not a requirement in order to be appointed as a director of APWC.
The Board may exercise all the powers of APWC to borrow money and to mortgage or charge its undertaking, property and uncalled share capital, or any part thereof. The Board may also issue debentures, debenture stock, and other securities whether outright or as security for any debt, liability or obligation of APWC or any third party.
| 10.2.17
| Amendment of Memorandum of Association and Bye-Laws |
Bermuda law provides that the memorandum of association of a company may be amended by resolution passed at a general meeting of which due notice has been given. An amendment to a memorandum of association does not require the consent of the Minister of Finance of Bermuda save for specific circumstances, for example, the adopting of any authority to carry on restricted business activities.
Under Bermuda law, the holders of:
•an aggregate of not less than twenty percent in par value of a company’s issued share capital or any class thereof; or
•not less in the aggregate than twenty percent of the company’s debentures entitled to object to amendments to its memorandum of association,
61
have the right to apply to the Supreme Court of Bermuda for an annulment of any amendment of the memorandum of association. Where such an application is made, the amendment becomes effective only to the extent that it is confirmed by the Bermuda Supreme Court. An application for an annulment of an amendment of the memorandum of association must be made within twenty-one days after the date on which the resolution amending the memorandum of association is passed and may be made on behalf of the persons entitled to make the application by one or more of their number as they may appoint in writing for the purpose.
Our
APWC’s Bye-Laws may be amended in the manner provided for in the Companies Act, which provides that the directors may amend the Bye-Laws, provided that any such amendment shall be effective only to the extent approved by the shareholders.
| 10.2.18
| Merger or Amalgamation |
The Companies Act provides that two or more Bermuda companies may merge and their undertaking, property and liabilities shall vest in one of such companies as the surviving company (referred to as a “merger” under Bermuda law). The Companies Act also provides that a Bermuda company may amalgamate with another company and continue as an amalgamated company (referred to as an “amalgamation” under Bermuda law). A merger or amalgamation requires a merger or amalgamation agreement which must be approved by the board of directors and at a meeting of the shareholders by seventy-five percent of the shareholders present and entitled to vote at such meeting in respect of which the quorum shall be two persons holding or representing by proxy more than one-third of the issued shares of the company. These provisions do not apply where a holding company is merging or amalgamating with one or more of its wholly-owned subsidiaries or where two or more wholly-owned companies of the same holding company are merging or amalgamating.
Under Bermuda law, in the event of a merger or an amalgamation of a Bermuda company, a shareholder who did not vote in favor of the transaction and who is not satisfied that fair value has been offered for the shares, may apply to the Supreme Court of Bermuda within one month of notice of the meeting of shareholders to appraise the fair value of those shares.
| 10.2.19
| Class Actions and Derivative Actions |
Class actions, as they are commonly understood in the United States, are not available to shareholders under Bermuda law. Derivative actions are generally only available to shareholders under Bermuda law in very limited circumstances. A shareholder may commence an action in the name of a company to remedy a wrong done to the company where the wrongdoers are in control of the company and the act complained of is of a fraudulent character, oppressive, beyond the corporate power of the company, illegal or would have required the approval of a greater percentage of the company’s shareholders than those that actually approved it. A shareholder may not commence such an action where the wrong complained of is capable of ratification by the company in a general meeting by ordinary resolution.
Since the July 2018 amendment to the Rules of the Supreme Court, if a derivative action is commenced and the relevant defendant enters an appearance, leave of the Supreme Court of Bermuda must be obtained before the derivative action can proceed.
When one or more shareholders believes the affairs of a company are being conducted in a manner which is oppressive or prejudicial to the interest of some part of the shareholders, the Supreme Court of Bermuda, upon petition, brought by the shareholder(s), may make such order as it sees fit if it is satisfied that the affairs of the company are or have been conducted in such an oppressive or prejudicial manner and, that, as a result, it would be just and equitable to wind up the company, but that to so wind up the company would unfairly prejudice the part of the shareholders ; such an order can include (with limitation) provisions regulating the conduct of the company’s affairs in the future or ordering the purchase of the shares of any shareholders by other shareholders or by the company, and in the case of a purchase of the shares by the company, for the reduction accordingly of the company’s capital or otherwise.
62
| 10.2.20
| Personal Liability of Directors and Indemnity |
The Companies Act requires every officer, including directors, of a company in exercising powers and discharging duties, to act honestly in good faith with a view to the best interests of the company, and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. The Companies Act further provides that any provision, whether in the bye-laws of a company or in any contract between the company and any officer or any person employed by the company as auditor, exempting such officer or person from liability, or indemnifying him against any liability which by virtue of any rule of law would otherwise attach to him, in respect of any fraud or dishonesty of which he may be guilty in relation to the company, shall be void.
Every director, officer and committee member shall be indemnified out of ourAPWC’s funds against all civil liabilities, loss, damage or expense including liabilities under contract, tort and statute or any applicable foreign law or regulation and all reasonable legal and other costs and expenses properly payable, incurred or suffered by him as director, officer or committee member; provided that the indemnity contained in the Bye-Laws will not extend to any matter which would render it void under the Companies Act as discussed above.
Other Miscellaneous Matters We have been designated by the Bermuda Monetary Authority as a non-resident under the Exchange Control Act of 1972 (the “Exchange Control Act”). This designation allows us to engage in transactions in currencies other than the Bermuda dollar.
The transfer of Common Shares between persons regarded as resident outside Bermuda for exchange control purposes and the issue of Common Shares to such persons may be effected without specific consent under the Exchange Control Act and regulations thereunder, provided the Common Shares are listed on an appointed stock exchange.
Notwithstanding the recording of any special capacity,
we areAPWC is not bound to investigate or incur any responsibility in respect of the proper administration of any estate or trust.
We
APWC will take no notice of any trust applicable to any of
ourits Common Shares whether or not
weit had notice of such trust.
As an “exempted company,” we areAPWC is exempt from Bermuda laws which restrict the percentage of share capital that may be held by non-Bermudians. However, as an exempted company weAPWC may not participate in certain designated business transactions, which we do not consider relevant to our present or planned business activities.
10.C. Material Contracts
Composite Services Agreement
(“CSA”)The
Our Company engages in transactions in the ordinary course of business with PEWC, including the purchase of certain raw materials and the distribution of PEWC products in various countries in the Asia Pacific region. The CompanyAPWC and PEWC are parties to a Composite Services agreement dated November 7, 1996, (the “Composite Services Agreement” or “CSA”), which the CompanyAPWC has renewed annually, at its option. The Composite Services Agreement contains provisions that define the relationship and the conduct of the respective businesses of theour Company and PEWC and confers certain preferential benefits on theour Company. In 2019,2022, there were no material changes to the CSA between APWC and PEWC. Pursuant to the Composite Services Agreement,
•PEWC agrees to (a) sell copper rod to theour Company, upon theour Company’s request, (i) at a price consisting of the spot price of copper on the LME plus an agreed upon premium and (ii) at prices and on terms at least as favorable as PEWC provides copper rod to other purchasers of similar amounts of copper rod in the same markets, and (b) give priority in the supply of copper rod to theour Company over other purchasers of copper rod from PEWC.
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| •
| The Company has the right to distribute any wire or cable product manufactured by PEWC in all markets in which the Company presently distributes or develops the capability to distribute in the future such products on such terms as have historically been in effect or on terms at least as favorable as PEWC grants to third parties that distribute such products in such markets. However, PEWC is not required to grant to the Company the right to distribute products manufactured by PEWC in the future in markets where the Company does not currently have the capability to distribute unless and until PEWC has no pre-existing contractual rights which would conflict with the grant of such right to the Company.
|
•Our Company has the right to distribute any wire or cable product manufactured by PEWC in all markets in which our Company presently distributes or develops the capability to distribute in the future such products on such terms as have historically been in effect or on terms at least as favorable as PEWC grants to third parties that distribute such products in such markets. However, PEWC is not required to grant to our
Company the right to distribute products manufactured by PEWC in the future in markets where our Company does not currently have the capability to distribute unless and until PEWC has no pre-existing contractual rights which would conflict with the grant of such right to our Company.
•Each of PEWC and theour Company will offer the other party the right to participate in any negotiations with a third party concerning the establishment of any facility or similar venture to manufacture or distribute any wire or cable product outside of the markets where theour Company currently manufactures or distributes, or intends to develop the capability to manufacture or distribute, any wire or cable product. Unless theour Company and PEWC mutually agree otherwise, theour Company has the right of first refusal to enter into any definitive agreement with such third party. If, however, such third party would not agree to the substitution of theour Company for PEWC or such substitution would prevent the successful completion of the facility or venture, PEWC has agreed to arrange for theour Company to participate to the extent possible.
•PEWC agrees to make available to theour Company, upon theour Company’s request and on terms to be mutually agreed between PEWC and theour Company from time to time, certain services and technology with respect to the design and manufacture of wire and cable products (including fiber optic products), and certain services with respect to computerization, inventory control, purchasing, internal auditing, quality control, emergency back-up services, and recruitment and training of personnel; such services may include the training of theour Company’s employees and managers at PEWC facilities and the secondment of PEWC employees and managers to theour Company.
•Without the consent of theour Company, PEWC will not compete with respect to the manufacture or distribution of wire and cable products in any market in which theour Company is manufacturing or has taken significant steps to commence manufacturing.
•For purposes of the Composite Services Agreement, each province in China is considered the equivalent of a country.
To
The foregoing is a summary of material terms of the extent that transactions occur inCSA. For the future between the Company and PEWC or affiliates of PEWC other than underfull agreement, we refer you to the Composite Services Agreement, a copy of which has been filed with the SEC.
10.D. Exchange Controls
APWC has been designated by the Bermuda Monetary Authority as a non-resident under the Exchange Control Act of 1972 (the “Exchange Control Act”). This designation allows APWC to engage in transactions in currencies other than the Bermuda dollar.
The transfer of Common Shares between persons regarded as resident outside Bermuda for exchange control purposes and the issue of Common Shares to such transactions willpersons may be entered intoeffected without specific consent under the Exchange Control Act and regulations thereunder, provided the Common Shares are listed on an arm’s length basis on terms no less favorable than those available from unaffiliated third parties.appointed stock exchange.
10.E. Taxation
The following is a summary of thecertain material U.S. federal income tax and Bermuda tax consequences of the acquisition, ownership and disposition of the Common Shares, based on the tax laws of the United States and Bermuda, subject to the assumptions, qualifications and limitations in our discussion below. Such summary is subject to changes in United States and Bermuda law, including changes that could have retroactive effect. Such changes in laws could result in different tax consequences from our summary below, and adversely affect your tax burden on investment income from APWC.
The following summary
does not take into account the individual circumstances of an investor,is neither intended as tax advice nor
does it purportpurports to
bedescribe a
complete technical analysis or examinationcomprehensive discussion of all
potentialpossible tax
effectsconsequences that may be relevant to
a decisionAPWC’s investors and prospective investors. Therefore, you are strongly urged to
purchase Common Shares, including without limitation,consult your own tax advisors regarding the
tax laws of the various states or localities within the United States.64
| 10.4.1
| United States Taxation
|
The following is a summary of the material United States federal incomeoverall tax consequences of the acquisition, ownership and disposition of the Common Shares by a U.S. Holder (as defined below) and a Non-U.S. Holder (as defined below), in each case, subject to the assumptions, qualifications and limitations in our discussion below. Such summary is subject to changes in light of your particular circumstances.
United States law, including changes that could have retroactive effect. The summary does not purport to be a comprehensive description of all possible tax considerations that may be relevant to a decision to purchase Common Shares. Taxation
This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”"Code'), regulations promulgated under the Code by theadministrative pronouncements, judicial decisions and final, temporary and proposed U.S. Treasury Department (the “Treasury”) (including proposed and temporary regulations), rulings, current administrative interpretations and official pronouncements of the IRS, and judicial decisions,Treasury regulations, all as currently in effect
of the date hereof, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. Such changeThe United States does not have a comprehensive income tax treaty with Bermuda.
We have not sought any ruling from the IRS in respect of the statements made and the conclusions reached in this discussion, and there can be no assurance that the IRS will agree with such statements and conclusions, or that the IRS will not challenge any of the positions taken by us and that such challenge, if any, will not be sustained. A different treatment from that described below could
materially and adversely affect the tax consequences
described below. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the
tax consequences described below. Further,ownership and disposition of our Common Shares as set forth in this
summary does not discuss any foreign, state or local tax consequences.summary.
In particular, this summary deals only with Common Shares held by U.S. Holders as capital assets for U.S. federal income tax purposes, and does not address any aspect of the United States“Medicare contributions tax” on “net investment income”, the U.S. federal alternative minimum tax, treatmentU.S. federal estate and gift taxes, state and local, and foreign tax consequences to U.S. Holders of the acquisition, ownership, and disposition of Common Shares.
This summary does not purport to deal with all aspects of U.S. Holders and Non-U.S. Holdersfederal income taxation that aremay be relevant to a particular holder in light of such holder’s circumstances. In particular, this summary does not address all of the tax consequences that may apply to members of a special class of holders subject to special treatment under the Code, such as rules, including:
•dealers in stocks, securities or currencies, currencies;
•persons subject to special tax accounting rules under Section 451(b) of the Code;
•regulated investment companies;
•real estate investment companies;
•traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, financial institutions,holdings;
•tax-exempt organizations;
•banks, insurance companies, tax-exempt entities, real estate investment trusts, regulated investment companies, qualified retirement plans, individual retirement accounts, andor any other tax deferred accounts, expatriatesfinancial institutions;
•persons that actually or constructively own 10% or more, by vote or value, of the United States, our Common Shares;
•persons subject to the alternative minimum tax, persons holding sharesthat hold our Common Shares as part of a hedging or conversion transactionstraddle or a straddle,hedging, conversion, or other integrated transaction for U.S. federal income tax purposes;
•persons who acquiredthat purchase or sell Common Shares pursuant to the exerciseas part of any employee stock optiona wash sale for U.S. federal income tax purposes;
•partnerships or otherwise as compensation for services,other pass-through entities and investors therein; or
•persons whose functional currency is not the United States dollar or who own (directly, indirectly or by attribution) 10% or more of the stock of the Company. This discussion is limited to investors who hold their shares as capital assets. No ruling has been or will be sought from the IRS regarding any matter discussed herein. Counsel to the Company has not rendered any legal opinion regarding any tax consequences to the Company or others of an investment in the Company. Consequently, prospective purchasers who are U.S. Holders or Non-U.S. Holders are advised to satisfy themselves as to the overall United States federal, state, local and foreign tax consequences of their acquisition, ownership and disposition of Common Shares by consulting their own tax advisors.As used herein, the term “U.S. Holder” means a beneficial owner of Common Shares that is (i) a citizen or resident of the United States, (ii) a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States or any state (or the District of Columbia), (iii) an estate, the income of which is subject to United States federal income tax regardless of its source, or (iv) a trust, if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more “United States persons” (as defined in Section 7701(a)(30) of the Code) has the authority to control all substantial decisions of the trust, or, to the extent provided in the Regulations, certain trusts in existence on August 20, 1996, and treated as U.S. Persons prior to such date, that elect to be treated as U.S. Persons.
The term “Non-U.S. Holder” means a beneficial owner of Common Shares that is not a U.S. Holder. As described in “Taxation of Non-U.S. Holders” below, the consequences to a Non-U.S. Holder may differ substantially from the tax consequences to a U.S. Holder.
US Dollar.
If a partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of Common Shares, the U.S. federal income tax consequences totreatment of a partner in thethat partnership generally will generally depend on the status of the partner and the activities of the partnership. A holderIf you are a partner of a partnership holding Common Shares, that is a partnership andyou should consult your own tax advisor regarding the partners in such partnershipU.S. federal income tax consequences to you.
Prospective investors of our Common Shares should consult their own tax advisors regarding the U.S. federal,
incomestate and local, and non-U.S. and other tax consequences of
the ownershipowning and
disposition of Common Shares.65
U.S. Federal Income Taxationdisposing of the Company
The Company expectsCommon Shares in their particular circumstances.
This summary applies to you if you are a U.S. Shareholder. As used herein, a "U.S. Shareholder" means a beneficial owner of our Common Shares who or that it will be treated as a foreign corporationis, for U.S. federal income tax purposes, any of the following:
•an individual who is a citizen or resident of the United States,
•a corporation, or other entity taxable as a corporation, created or organized under the laws of the United States, any state thereof or the District of Columbia,
•an estate whose income is subject to U.S. federal income tax regardless of its source, or
•a trust if a U.S. court can exercise primary supervision over the trust's administration and it will make no electionone or more U.S. persons (as defined in the Code and Treasury Regulations) are authorized to control all substantial decisions of the trust.
Taxation of U.S. Holders
Subject to the
contrary. As adiscussion of the “passive foreign
corporation, subject to theinvestment company” rules
discussed below, the
income, gains, losses, deductions and expensesgross amount of
the Company will not be passed throughany distributions of cash or property with respect to
the investors, and all distributions by the Company to the investorsour Common Shares generally will be treated as dividends
return of capital, and/or capital gains.The Company currently does not conduct activities in the United States and expects that it will continue to conduct activities in a manner so as not to constitute the conduct of a trade or business in the United States or, invest in securities the income from which is treated, for U.S. federal income tax purposes as arising from a U.S. trade or business. As a result, the income of the Company generally should not be subject to U.S. federal income tax on a net income basis. However, gains realized from certain investments in United States real property interests by foreign persons, such as the Company, may be subject to U.S. federal income tax on a net basis, withholding tax and a branch profits tax. Debt instruments with an equity component linked to a United States real property interest and stock in certain United States corporations holding significant real property interests may be considered United States real property interests taxable as described above.
Taxation of U.S. Holders
The discussion in “Taxation of Dividends” and “Taxation of Capital Gains” below assumes that the Company will not be treated as a PFIC for U.S. federal income tax purposes. For a discussion of the rules that apply if the Company is treated as a PFIC, see the discussion in “Passive Foreign Investment Company” below.
Taxation of Dividends
In November 2016, the Company announced the implementation of a dividend policy pursuant to which the Company would seek to distribute as a cash dividend at least 25% of its net post-tax audited consolidated profit attributable to APWC shareholders. On November 30, 2018, the Company paid a cash dividend of $0.08 per Common Share to holders of record as of September 14, 2018, in accordance with the Company's dividend policy. A U.S. Holder receiving a distribution with respect to Common Shares generally will be required to include such distribution in gross income (as ordinary income subject to regular, and not reduced, tax rates) on the day received as foreign-source dividend income to the extent such distribution is paid from the Company’sout of our current or accumulated earnings and profits, (asas determined under United StatesU.S. federal income tax principles).principles. Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated first as a return of capital that is applied against and reduces the U.S. Shareholder's adjusted tax basis in the Common Shares, but not below zero, and thereafter as capital gain realized on the sale or other disposition of the Common Shares. Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Shareholders as dividends.
Taxation of Dividends
Subject to the discussion of the “passive foreign investment company” rules below, the gross amount of any distributions of cash or property with respect to our Common Shares generally will be treated as dividends for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated first as a return of capital that is applied against and reduces the U.S. Shareholder's adjusted tax basis in the Common Shares, but not below zero, and thereafter as capital gain realized on the sale or other disposition of the Common Shares. Because we do not maintain calculations of our earnings and profits under U.S. federal income tax principles, it is expected that distributions generally will be reported to U.S. Shareholders as dividends. The amount of any distribution paid in a foreign currency will be equal to the U.S. dollar value of such currency, translated at the spot rate of exchange on the date such distribution is received, regardless of whether the payment is in fact converted into U.S. dollars at that time.
Any dividends that a U.S. Shareholder receives will be includable in such holder’s gross income as ordinary income on the day such holder actually or constructively receives them. Such dividends will not be eligible for the dividends received deduction (generallygenerally allowed to certain United States corporations in respect of dividends received from United States corporations).corporate U.S. Holders that are corporations and directly own 10% or moreShareholders. Dividends paid by us generally will be non-U.S. source income for purposes of the voting stockU.S. “foreign tax credit” rules. The rules governing U.S. foreign tax credits are complex and involve the application of rules that depend on the Companyparticular circumstances of each U.S. Shareholder. Therefore, each U.S. Shareholder should consult his, her or its own tax advisor with respect to the availability of U.S. foreign tax credits to such U.S. Shareholder’s particular circumstances.
Subject to certain limitations, including certain limitations based on taxable income and filing status, and subject to certain minimum holding period requirements, dividends paid to non-corporate U.S. Shareholders, including individuals, may be
entitledeligible for a reduced rate of taxation if we are deemed to
claimbe a
“qualified foreign
tax creditcorporation” for
United States federal income tax purposes in respect of foreign taxes paid by the Company and certain subsidiaries. However, if a U.S. Holder claims the foreign tax credit, it must “gross-up” the deemed tax payment and treat the grossed-up amount as part of the dividend distribution, so that the amount included in income is equal to the dividend received plus the amount of the foreign tax deemed paid by such U.S. Holder.Under U.S. federal income tax laws, a dividend paid to an individual U.S. shareholder from either a domestic corporation or a “qualified foreign corporation” is subject to tax at the reduced rates applicable to certain capital gains.purposes. A qualified foreign corporation includes certain foreign corporations thata non-U.S. corporation if (1) its shares (including the Common Shares) are readily tradable on an established securities market in the United States or (2) it is eligible for the benefits of a comprehensive income tax treaty with the United States which the Secretary of the Treasury determinesthat meets certain requirements. However, a corporation is satisfactory for purposes of this provision and which includes an exchange of information program. In addition, a foreign corporation not otherwise treated as a qualified foreign corporation if it is so treated with respect to any dividend it pays ifa “passive foreign investment company” (as discussed below) for the stock with respect totaxable year in which it pays suchthe dividend is readily tradablepaid or the preceding taxable year. The Common Shares are traded on the Nasdaq Capital Market, an established securities market in themarket. The United States.
In the absence ofStates does not have a comprehensive income tax treaty betweenwith Bermuda. Each U.S. Shareholder should consult his, her or its own tax advisor regarding the United Statestreatment of dividends and Bermuda, the Company will not be treated as a “qualified foreign corporation” under the treaty test. So long as the Company is not a PFIC (as discussed below), dividends paid by the Company to individual shareholders would qualify for these reduced rates if its stock was treated as readily tradable on an established securities market in the United States.
66
In Notice 2003-71, 2003-2 C.B. 922, the IRS determined that common or ordinary stock, or an American depositary receipt in respect of such stock, is considered readily tradable on an established securities market in the United States if it is listed on a national securities exchange that is registered under Section 6 of the Securities Exchange Act of 1934 (15 U.S.C. 78f) or on The Nasdaq Stock Market. As stated in the SEC’s Annual Report for 2002, registered national exchanges as of September 30, 2002 include the American Stock Exchange (now known as NYSE Amex Equities), the Boston Stock Exchange, the Cincinnati Stock Exchange, the Chicago Stock Exchange, the NYSE, the Philadelphia Stock Exchange, and the Pacific Exchange, Inc.
For so long as the Common Shares continue to be traded on Nasdaq, or are readily tradable on any other established securities market in the United States, any dividends paid by the Company should qualify for the reduced rates referred to above so long as they remain in effect.
To the extent any distribution exceeds the current and accumulated earnings and profits of the Companyholder's eligibility for a taxable year, the distribution will be treated as a non-taxable returnreduced rate of capital to the extent of the U.S. Holder’s adjusted tax basis in the Common Shares with respect to which the distribution is made, causing a reduction in the adjusted basis of the Common Shares (thereby increasing the amount of gain, or decreasing the amount of loss, to be recognized by the U.S. Holder on a subsequent disposition of the Common Shares). To the extent such distribution exceeds the U.S. Holder’s adjusted tax basis in the Common Shares, such excess will be treated as capital gain.
taxation.
Taxation of Capital Gains
A
Subject to the discussion of the “passive foreign investment company" rules below, a U.S.
HolderShareholder generally will recognize
taxable gain or loss on
anythe sale
exchange or
other dispositionexchange of Common Shares
(including a liquidation, dissolution or as a result of a non-pro rata redemption of Common Shares that qualified for treatment as a sale or exchange for United States federal income tax purposes) in an amount equal to the difference between the amount realized
foron the
Common Sharessale or exchange and the U.S.
Holder’sShareholder’s adjusted tax basis in the Common Shares. Such gain or loss
generally will be
treated as capital gain or loss and will be long-term capital gain or loss if the Common Shares
have beenwere held for more than one
year on the date of the sale, exchange or other disposition thereof, and will be short-term capital gainyear. Gain or loss, if
the Common Shares have been held for one year or less on the date of the sale or exchange thereof. Any gainany, recognized by a U.S.
HolderShareholder generally will be treated as
United States source income. In general, an individual’s short-term capital gains are taxable as ordinary income and an individual’s long-term capital gains are subjectU.S.-source gain or loss for U.S. foreign tax credit limitation purposes. A U.S. Shareholder’s adjusted tax basis in its Common Shares generally is equal to its purchase price for such shares, adjusted according to U.S. federal income tax
at preferential rates.principles. Long-term capital gains of corporationsrecognized by non-corporate U.S. Shareholders generally arewill be subject to thetax at reduced rates. The deductibility of capital losses is subject to limitations.
Passive Foreign Investment Company
A non-U.S. corporation will be classified as a passive foreign investment company (a “PFIC”) for U.S. federal income tax at a current ratepurposes if either:
•75% or more of 21%. Short-term capital gain generally is taxable at ordinaryits gross income rates. Although capital gains of corporations currently are taxed atfor the same rates as ordinary income, the distinction between capital gain and ordinary income or loss is relevant for purposes of, among other things, limitations on the deductibility of capital losses. Corporations may deduct capital losses only to the extent of capital gains and generally may carry back capital losses to each of the preceding three years and carry forward capital losses to each of the succeeding five years. Individuals may deduct capital losses to the extent of capital gains plus up to $3,000 ($1,500 for married individuals filing separate returns) and may carry forward capital losses indefinitely.67
Backup Withholding
In general, information reporting requirements may be applicable to dividend payments (or other taxable distributions) made in respect of Common Shares to non-corporate U.S. Holders, and “backup withholding” at the rate of 24% will apply to such payments (i) if the holder or beneficial owner fails to provide a taxpayer identification number in the manner required by U.S. law and applicable regulations, (ii) if the IRS notifies the payor that the taxpayer identification number furnished by the holder or beneficial owner is incorrect, (iii) if there has been notification from the IRS of a failure by the holder or beneficial owner to report all interest or dividends required to be shown on its United States federal income tax returns or (iv) in certain circumstances, if the holder or beneficial owner fails to comply with applicable certification requirements. In general, payment of the proceeds from a sale of Common Shares to or through a United States office of a broker is subject to both United States backup withholding and information reporting unless the holder or beneficial owner establishes an exemption. U.S. Holders who are required to establish their exempt status generally must provide such certification on IRS Form W-9. Amounts withheld under the backup withholding rules may be credited against a holder’s tax liability, and a holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS. Payment of the proceeds from the sale of Common Shares effected outside the United States by a foreign office of certain United States connected brokers will not be subject to backup withholding tax but will be subject to information reporting requirements unless the broker has documentary evidence in its records that the beneficial owner is a non-U.S. Holder and has no actual knowledge to the contrary, or the beneficial owner otherwise establishes an exemption.
Passive Foreign Investment Company
In general, the Company will be treated as a PFIC for United States federal income tax purposes for any taxable year if either (i) at least 75% of the gross income of the Company is passive incomeincome; or (ii) at least 50% of the value (determined
•on the basis of a quarterly average)average for the taxable year by value (or, if it is not a publicly traded corporation and so elects, by adjusted basis) 50% or more of the Company’sits assets is attributable to assets that produce or are held for the production of passive income. The Company believes,
For the purposes of this test, such non-U.S. corporation will be treated as owning its proportionate share of the assets and earning its proportionate share of the income of any other corporation in which it owns, directly or indirectly, 25% or more (by value) of the stock.
Based on current projections concerning the composition of APWC’s income and assets, APWC does not believe that it will be treated as a PFIC for its current or future taxable years. However, because this conclusion is based on
itsour current
operationsprojections and
assets,expectations as to our future business activity, we can provide no assurance that
it isAPWC will not
a PFIC and does not expect to becomebe treated as a PFIC in
the future. This conclusion is a factual determination based on, among other things, a valuationrespect of
the Company’s assets, which will likely change from time to time.its current or any future taxable years. If the Company werewe are classified as a PFIC for U.S. federal income tax purposes, a U.S. Shareholder that does not make an election to treat us as a “qualified electing fund” and did not make a “mark-to-market” election, each as described below, will be subject to the following U.S. federal income tax consequences:
•“Excess distributions” we make to a U.S. Shareholder would be taxed in a special way. “Excess distributions” are amounts received by a U.S. Shareholder with respect to our Common Shares in any taxable year during which a U.S. Holder held Common Shares,that exceed 125% of the U.S. Holder would be subject to special tax rules with respect to (i) any “excess distribution” by the Company to the U.S. Holder (generally any distributionaverage distributions received by the U.S. Holder in a taxable year that is greater than 125% of the average annual distribution received by the U.S. HolderShareholder from us in the shorter of either the three preceding taxableprevious years or the U.S. Holder’sShareholder’s holding period for thesuch Common Shares if shorter) and (ii) any gain realized onbefore the sale or other disposition (including a pledge) of Common Shares.68
Under these special tax rules, (i) the excess distribution or gain wouldcurrent taxable year. Excess distributions must be allocated ratably over theto each day that a U.S. Holder’s holding period for theShareholder has held our Common Shares, (ii) the amountShares. A U.S. Shareholder must include amounts allocated to the U.S. Holder’s current taxable year and to any periodnon-PFIC years in his or her gross income as ordinary income for that year. A U.S. Shareholder must pay U.S. federal income tax on amounts allocated to each prior taxable PFIC year at the highest marginal tax rate in effect for that year on ordinary income and the tax is subject to an interest charge at the rate applicable to deficiencies for U.S. federal income tax.
•The entire amount of gain that is realized by a U.S. Shareholder upon the sale or other disposition of our Common Shares would also be considered an excess distribution and would be subject to U.S. federal income tax as described above.
•A U.S. Shareholder’s adjusted tax basis in shares that were acquired from a U.S. decedent would not receive a step-up to fair market value as of the date of the decedent’s death but instead would be equal to the decedent’s adjusted tax basis, if lower than such value.
The special PFIC rules do not apply to a U.S. Shareholder if the U.S. Shareholder makes an election to treat us as a “qualified electing fund” in the first taxable year in which the
Company was a PFIC would be includible as ordinary income in the U.S.
Holder’s current taxable year and (iii) the amount allocated to a prior year during which the Company was a PFIC would be subject to tax at the highest tax rate in effect for that year, and an interest charge would also be imposed with respect to the resulting tax attributable to each such prior year. The interest charge is computed using the applicable rates imposed on underpayments of United States federal income tax for the relevant periods. The above rules will not apply if a “mark-to-market” election is available and a U.S. Holder validly makes such an election by filing a properly completed IRS Form 8621. If such election were made, a U.S. Holder generally would be required to take into account the difference, if any, between the fair market value and its adjusted tax basis in theShareholder owns our Common Shares
at the endand if we comply with certain reporting requirements. Instead, a shareholder of
a qualified electing fund is required for each taxable year
as ordinaryto include in income
or ordinary loss (to the extent of any net mark-to-market gains previously included in income). Thus, the U.S. Holder may recognize taxable income without receiving any cash to pay its tax liability with respect to such income. A U.S. Holder’s tax basis in the Common Shares would be adjusted to reflect any such income or loss amount. In addition, any gain from a
sale, exchange or other dispositionpro rata share of the
Common Shares would be treatedordinary earnings of the qualified electing fund as ordinary income and
any loss would be treateda pro rata share of the net capital gain of the qualified electing fund as
ordinary loss (to the extent of any net mark-to-market gains previously included in income). A mark-to-market election is availablelong-term capital gain, subject to a
U.S. Holder only if the Common Shares are considered “marketable stock” for these purposes. Generally, sharesseparate election to defer payment of
a PFIC will be considered marketable stock if they are “regularly traded” on a “qualified exchange” within the meaning of applicable U.S. Treasury regulations. A class of sharestaxes, which deferral is
regularly traded during any calendar year during which such class of shares is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. A “qualified exchange” is definedsubject to
include a national securities exchange registered with the SEC or certain foreign exchanges. As the Common Shares of the Company commenced trading on Nasdaq beginning on April 29, 2011, the mark-to-market election under the rules discussed above is available if the Company were otherwise classified as a PFIC, for so long as the Common Shares continue to be regularly traded on Nasdaq or another qualified exchange.The special tax rules described above will also not apply to a U.S. Holder if the U.S. Holder elects to have the Company treated as a “qualified electing fund” (a “QEF election”) and the Company provides certain information to U.S. Holders. If the Company is treated as a PFIC, it will notify the U.S. Holders and provide such holders with the information necessary to make an effective QEF election, including information as to the procedures for making such an election.interest charge. The QEF election is made on a shareholder-by-shareholdershareholder-by-
shareholder basis and
can ordinarilymay be revoked only with the consent of the IRS.
A U.S. HolderShareholder makes the election by attaching a completed IRS Form 8621, including the PFIC annual information statement, to a timely filed U.S. federal income tax return. Even if an election is not made, a U.S. Shareholder generally must file a completed IRS Form 8621 in each year that makeswe are a valid QEF election willPFIC. U.S. Shareholders should be currently taxable on its pro rata share of the Company’s ordinary earnings and net capital gain (at ordinary income and capital gains rates, respectively)aware that, for each taxable year, if any, that we are a PFIC, we can provide no assurances that we will satisfy the Company isrecord keeping requirements of a PFIC, or that we will make available to U.S. Shareholders the information such U.S. Shareholders require to make a “qualified electing fund” election with respect to us.
A U.S. Shareholder who owns PFIC shares that are publicly traded could elect to mark the shares to market annually, recognizing as ordinary income or loss each year an amount equal to the difference as of the close of the taxable year between the fair market value of the PFIC shares and the U.S. Shareholder’s adjusted tax basis in the PFIC shares. If such a mark-to-market election were made, then the rules set forth above would not apply for periods covered by the election. Assuming that we are trading on the Nasdaq Capital Market, our Common Shares are expected to be treated as publicly traded for purposes of the mark-to-market election and, therefore, such election should be able to be made if we are classified as a
PFIC, regardless of whether distributionsPFIC. A mark-to-market election is, however, subject to complex and specific rules and requirements, and U.S. Shareholders are
received. Thus, the U.S. Holder may recognize taxable income without receiving any cashstrongly urged to
pay its tax liability with respect to such income. The U.S. Holder’s basis in the Common Shares will be increased to reflect taxed but undistributed income. Distributions of income that have been previously taxed will result in a corresponding reduction of basis in the Common Shares and will not be taxed again as a distribution to the U.S. Holder.A U.S. Holder owning Common Shares during any year that the Company is a PFIC must file IRS Form 8621. U.S. Holders should consult their tax advisors concerning the United States federal income tax consequences of holding Common Shares and of making a mark-to-market or QEFthis election if the Company is treatedwe are classified as a PFIC in the future.
69
Controlled Foreign Corporation
A non-U.S. corporation generally will be a CFC for PFIC.
U.S.
tax purposes if United States shareholders collectively own more than 50 percent of the total combined voting power or total value of the corporation’s stock on any day during any taxable year. For this purpose, United States shareholders are limited to those U.S. persons who own, directly, indirectly or constructively, 10 percent or more of the total combined voting power of all classes of stock of the non-U.S. corporation. If a corporation is a CFC for an uninterrupted period of 30-days in any tax year, every United States shareholder that owns stock on the last day of the CFC’s tax year, must include in gross income such shareholder’s pro rata share of the CFC’s “subpart F income” and income from investments in certain types of U.S. property (i.e., tangible personal property located in the United States, stock of a United States corporation, an obligation of a United States person, or a right to use patents, copyrights, and other similar property in the United States) even if the income has not been distributed to the shareholders in the form of dividends or otherwise. Subpart F income consists of certain specified categories of income including, among others, dividends, interest, rents, royalties, net gains from the sale of property giving rise to such income and income from certain types of transactions involving “related persons” as defined for U.S. federal income tax purposes.The Tax Cuts and Jobs Act of 2017 introduced a new category of income called Global Intangible Low Tax Income (“GILTI”) that, like subpart F income, is deemed repatriated in the year earned. GILTI is basically the income of a CFC reduced by certain adjustments such as U.S. effectively connected income or other subpart F income, that exceeds 10% of the CFC’s Qualified Business Asset Investment (“QBAI”). QBAI is the CFC’s fixed assets that are depreciable as trade or business assets and does not include the CFC’s patents, trademarks, and certain other amortizable intangible property.
Taxation of Non-U.S. Holders
Taxation of Dividends
Subject to the discussion in “Backup Withholding” below, Non-U.S. Holders generally will not be subject to U.S. federal income tax, including withholding tax, on distributions received on Common Shares, unless the distributions are effectively connected with a trade or business conducted in the United States (and, if an applicable income tax treaty so requires, attributable to a permanent establishment maintained in the United States).
If distributions are effectively connected with a U.S. trade or business (and, if applicable, attributable to a U.S. permanent establishment), Non-U.S. Holders generally will be subject to tax on such distributions in the same manner as U.S. Holders, as described in “Taxation of U.S. Holders — Taxation of Dividends” above. In addition, any such distributions received by a corporate Non-U.S. Holder may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
Taxation of Capital Gains
Gain realized by Non-U.S. Holders upon the sale or exchange or complete redemption of Common Shares held as a capital asset generally should not be subject to United States federal income tax provided that the gain is not effectively connected with a trade or business conducted in the United States (and, if an applicable tax treaty so requires, attributable to a permanent establishment maintained in the United States). However, in the case of nonresident alien individuals, such gain will be subject to the 30% (or lower tax treaty rate) U.S. flat tax if (i) such person is present in the United States for 183 days or more during the taxable year (on a calendar year basis unless the nonresident alien individual has previously established a different taxable year) and certain other conditions are met; and (ii) such gain is derived from U.S. sources.
Generally, the source of gain upon the sale or exchange or complete redemption of Common Shares is determined by the place of residence of the shareholder. For purposes of determining the source of gain, the Code defines residency in a manner that may result in an individual who is otherwise a nonresident alien with respect to the United States being treated as a United States resident for purposes of determining the source of income only. Each potential individual investor who anticipates being present in the United States for 183 days or more (in any taxable year) should consult a separate, outside tax advisor with respect to the possible application of this rule.
70
Special rules may apply in the case of shareholders (i) that have an office or fixed place of business in the United States to which a distribution or gain in respect of the Common Shares is attributable; or (ii) that are former citizens or residents of the United States, CFCs, foreign personal holding companies or corporations that accumulate earnings to avoid United States federal income tax. Such persons in particularShareholders are urged to consult their United States tax advisors before investing inregarding the Company.
Backup Withholding
In the caseadverse tax consequences of owning our Common Shares heldif we are, or become, a PFIC, and the possibility of making certain elections designed to lessen those adverse consequences.
U.S. Information Reporting and Backup Withholding
Dividends paid, if any, on our Common Shares to a U.S. Shareholder may be subject to information reporting and, unless a U.S. Shareholder either furnishes its taxpayer identification number or otherwise establishes an exemption, may also be subject to U.S. backup withholding tax. In addition, information reporting generally will apply to payments of proceeds from the sale, exchange, redemption or other disposition of our Common Shares by a
Non-U.S. Holder, or held inpaying agent, including a broker, within the United States
byto a
custodianU.S. Shareholder. A paying agent within the United States will be required to impose backup withholding on any payments of the proceeds from the sale, exchange redemption or
nominee for a Non-U.S. Holder, U.S. back-up withholding taxes may apply to distributions in respectother disposition of
suchthe Common Shares
unlesswithin the United States to a U.S. Shareholder if such
Non-U.S. Holder properly certifies asU.S. Shareholder fails to
furnish its
non-U.S. status using the appropriate version of IRS Form W-8.correct taxpayer identification number or otherwise fails to establish an exemption or comply with such backup withholding requirements. Backup withholding is not an additional tax. Amounts withheld as backup withholding from a payment to a Non-U.S. Holdertax and may be refunded (or credited against histhe U.S. Shareholder’s U.S. federal income tax liability, and a Non-U.S. Holder may obtain a refund of any excess amounts withheld by filing the appropriate claim for refund with the IRS and furnishing anyif any), provided that certain required information in a timely manner.
Future Tax Legislation
Future amendmentsis furnished to the Code, other legislation, new or amended U. S. Treasury Regulations, administrative rulings or guidance by the IRS, or judicial decisionsIRS. The information reporting requirements may adversely affect the federal income tax aspectsapply regardless of an investment in the Company, with or without advance notice, and retroactively or prospectively.
U.S. Treasury Circular 230 Notice
Any United States federal tax advice included in this Annual Report (a) was not intended to be used, and cannot be used, for the purpose of avoiding United States federal tax penalties, and (b) was not written to support the promotion or marketing of the Company, its Common Shares or any transaction(s) or matter(s) addressed in the written advice. The taxpayer should seek advice based upon the taxpayer’s particular circumstances from an independent tax adviser.
whether withholding is required. The following discussion correctly describes the material tax consequences of the ownership of Common Shares under Bermuda law, subject to the assumptions, qualifications and limitations in the discussion below. Such summary is subject to changes in Bermuda law, including changes that could have retroactive effect.
Taxation
Under current Bermuda law, there are no taxes on profits, income or dividends nor is there any capital gains tax. Furthermore,
the CompanyAPWC has received from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act of 1966, as amended, an undertaking that, in the event that Bermuda enacts any legislation imposing tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax shall not be applicable to
the CompanyAPWC or to any of its operations, or the shares, debentures or other obligations of
the Company,APWC, until March 31, 2035. This undertaking does not, however, prevent the imposition of any such tax or duty on such persons as are ordinarily resident in Bermuda and holding such shares, debentures or obligations of
the CompanyAPWC or of property taxes on
Company-ownedAPWC’s self-owned real property or leasehold interests in Bermuda.
As an exempted company,
the CompanyAPWC must pay to the Bermuda government an annual government fee calculated on a sliding-scale basis by reference to its assessable capital, that is, its authorized share capital plus any share premium.
There is no stamp duty or other transfer tax payable upon the transfer of shares in
the CompanyAPWC by shareholders.
71
10.F. Dividends and Paying Agents
Not applicable
The United States does not have a comprehensive income tax treaty with Bermuda.
10.G. Statement by Experts
Not applicable
10.H. Documents on Display
APWC is required to comply with the reporting requirements of the Exchange Act, applicable to a foreign private issuer.
We areAPWC is currently required to file annually a Form 20-F no later than four months after the close of
ourits fiscal year, which is December 31. Any time
the CompanyAPWC is delinquent in filing timely any periodic reports, including an Annual Report on Form 20-F, with the SEC, that delinquency may adversely affect
the Company’sAPWC’s status on any exchange or quotation service on which its shares are listed or quoted and
the CompanyAPWC may not be entitled to use certain abbreviated registration statements with the SEC in connection with the registration of any of its securities.
We haveAPWC has not been delinquent in filing our annual reports in any of the past five years.
As a foreign private issuer,
we areAPWC is exempt from the rules under the Exchange Act prescribing the furnishing and content of proxy statements, and
ourits officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.
Our reports and other information, when so filed, may be accessed over the Internet on the SEC’s website at http://www.sec.gov.
In addition, we post certain information regarding theour Company and its operations on our website located at www.apwcc.com. Summary information regarding theour Company posted on our website should not be considered to be a substitute for, or a restatement of, the more complete information regarding theour Company, its results of operations and financial condition set forth in this Annual Report or other documents or information which we may file with the SEC.
ITEM 11:
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
|
The
10.I. Subsidiary Information
Not applicable
ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Our Company has exposure to several quantitative market risks, including fluctuations in interest rates, foreign currency exchange rates and the pricing of commodities, principally copper, theour Company’s main raw material. Risk management measures undertaken by theour Company include entering into derivative agreements covering foreign exchange rates and copper pricing, as well as copper forward pricing agreements. TheOur Company does not purchase or sell derivative instruments for trading purposes. TheOur Company does not engage in trading activities involving copper contracts for which a lack of marketplace quotations would necessitate the use of fair value estimation techniques.
The
11.1 Interest Rate Risk
Our Company is not currently a party to any derivative instruments to manage interest rate exposure. In the current interest rate environment, theour Company does not believe that the limited potential loss limitation protection available through the purchase of interest rate swaps or other derivative instruments against its exposure under floating rate finance facilities merits the cost that would be incurred in those transactions.
| 11.2
| Foreign Currency Risk
|
The
11.2 Foreign Currency Risk
Our Company has exposure to fluctuations in currency exchange rates.
TheOur Company’s revenues are generated primarily in the local currency or currencies in its principal operating regions, North Asia, Thailand, and the ROW, which are also its reporting segments. However, significant proportions of raw materials are in U.S. dollars.
72
As theour Company’s operating subsidiaries incur operating costs in the local currency where they operate, theour Company believes it is prudent that those operating subsidiaries incur indebtedness in the local currency when debt financing is necessary. The amount of indebtedness incurred by our operating subsidiaries from time to time is a function of our business strategy, the attractiveness of borrowing as opposed to other methods of financing operations and tax implications, among other considerations. TheOur Company has exposure to currency exchange risk when the results of its operating subsidiaries are translated from the localfunctional currencies into its reporting currency, into the U.S. dollar. At December
31, 20192022 and 2018,2021, the other comprehensive income in the total equity section of the consolidated balance sheets included currency translation adjustments of $9.8$20.1 million and $15.3$12.7 million, respectively.
| 11.3
| Market Risks Relating to Copper
|
See “Item 3: Key Information–Risk Factors–Risks Related to our Financial Activities–Foreign exchange fluctuations could materially impact our financial performance and our financial condition” for information about the effects of foreign currency fluctuations on our Company.Our Company enters into foreign exchange forward contracts with the intent to reduce the foreign exchange risk of expected sales and purchase transactions. Our Company monitors the foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise. See Notes 11 and 27 to APWC’s Financial Statements.
11.3 Market Risks Relating to Copper
Copper is the principal raw material we use, accounting for a majority portion of the cost of sales in 2019.2022. We purchase copper at prices based on the average prevailing international spot market prices on the LME for copper for the one month prior to purchase. The price of copper is influenced heavily by global supply and demand as well as speculative trading. As with other costs of production, changes in the price of copper may affect our cost of sales. Whether this has a material impact on our operating margins and financial results depends primarily on our ability to adjust our selling prices to our customers, such that increases and decreases in the price of copper are reflected in those selling prices.prices going forward. The purchaseselling price of our products is based in part on the cost of copper used to manufacture those products. In addition, in the ordinary course of business we maintain inventories of raw materials and finished products reasonably necessary for the conduct of our business. These inventories typically reflect the cost of copper prevailing in the market at the time we purchase. Most of our sales of Manufactured Productsproducts reflect copper prices prevailing at the time the products are ordered. Aordered by our customers. However, in the cases when our Company enters into a sales contract at fixed prices, rising copper price could render this sales contract onerous that requires our Company to recognize the related onerous losses. In addition, a long-term decrease in the price of copper would require theour Company to revalue the value of its inventory at periodic intervals to the then market value, which could be below cost. Copper prices have been subject to considerable volatility and it is not always possible to manage our copper purchases and inventory so as to neutralize the impact of copper price volatility. Accordingly, significant volatility in copper prices could have a material adverse effect on the results of our operations. No assurance can be given that such volatility will not recur.
The
11.4 Equity Price Risk
Our Company is exposed to equity price risk as a result of our unlisted available-for-sale equity securities. The carrying value of these investments in private companies is subject to fluctuations and their fair market value may be significantly different from the carrying value.
| 11.5
| Fair Value of Designated Market-Sensitive Derivative Contracts
|
11.5 Fair Value of Designated Market-Sensitive Derivative Contracts
Not applicable
Item 12:
| Description of Securities Other Than Equity Securities
|
ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Part II
Item 13:
| Defaults, Dividend Arrearages and Delinquencies
|
The Company has not experienced any material default in the payment of principal, interest, a sinking or purchase fund installment, or incurred any other material default, not cured within 30 days relating to the Company’s or any of its consolidated subsidiaries’ indebtedness.
Item 14:
| Material Modifications to the Rights of Security Holders and Use of Proceeds
|
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Not applicable
ITEM 15:
| CONTROLS AND PROCEDURES
|
ITEM 15: CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation was carried out under the supervision and with the participation of our management, including theAPWC’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures in accordance with the provisions of Rule 13a-15 promulgated under the Securities Exchange Act of 1934, as amended.Act. Based upon that evaluation, our managementAPWC’s CEO and CFO concluded that our disclosure controls and procedures were effective as of December 31, 2019.2022.
Management’s report on Internal Control over Financial Reporting
The Company’s
APWC’s management, including
ourAPWC’s CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting. We do not expect that our internal control will prevent all errors and all fraud, or eliminate the possibility of fraudulent conduct. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
The Company’s
APWC’s management, including itsAPWC’s CEO and CFO, has assessed the effectiveness of our internal control over financial reporting as of December 31, 20192022 (the “Assessment Date”). In making its assessment, management used the criteria set forth in Internal"Internal Control — Integrated FrameworkFramework" issued in 2013 by the Committee of Sponsoring Organizations (“COSO”) of the Treadway Commission.Commission (“COSO”). These criteria include the control environment, risk assessment, control activities, information and communication and monitoring of each of the above criteria. Based on this assessment, the Company’sAPWC’s management, including itsAPWC’s CEO and CFO, concluded that the Company’sAPWC’s internal control over financial reporting was effective as of the Assessment Date.No Requirement
Attestationreport of Auditor Attestationregistered public accounting firm
This
annual reportAnnual Report does not contain an attestation report of
the Company'sour registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by
the Company'sour registered public accounting firm
pursuantdue to
temporary rules of the
Commissionfact that
permit the Company to provide only management'ssuch report
in this annual report.74
is not required as APWC is a non-accelerated filer.
Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation of such internal control that occurred during the last fiscal year that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A:
| AUDIT COMMITTEE FINANCIAL EXPERT
|
67
For more than the past five (5) years, the Common Shares of the Company have been trading on Nasdaq. During those periods of time when the Company did not have any independent directors, our full Board of Directors fulfilled the functions of an audit committee pursuant to Section 3(a)(58)(B) of the Exchange Act.
ITEM 16A: AUDIT COMMITTEE FINANCIAL EXPERT
For each of 2017, 20182022, 2021 and 2019, our audit2020, APWC’s Audit committee has consisted of ourAPWC’s three independent directors, Mr. Anson Chan, Dr. Yichin Lee and Dr. Lambert L. Ding, with Mr. Chan serving as the Audit Committee’s chairman and financial expert. The Audit Committee of the Company’s Board of Directors meets the independence requirements set forth in Regulation 10A-3 under the Exchange Act and under the rules of Nasdaq. Please see Section 6.a. of this Annual Report for additional information on Mr. Chan, Dr. Lee and Dr. Ding.
ITEM 16B: CODE OF ETHICS
On April 26, 2005, the CompanyAPWC adopted a code of ethics applicable to its Chief Executive Officer and senior financial officers. A copy of the Company’sAPWC’s code of ethics for senior executives is on file with the SEC.SEC (see Item 19 below).
Item 16C:
| Principal Accountant Fees and Services
|
ITEM 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES
The aggregate fees for fiscal years
20192022 and
20182021 for professional services rendered by the principal independent accountant for the audit of
the Company’sAPWC’s annual financial statements totaled $0.9 million and
$0.8$1.0 million, respectively.
The aggregate fees for fiscal years
20192022 and
20182021 for professional services rendered by the principal independent accountant for tax compliance, tax advice and tax planning totaled approximately
$39$41.7 thousand and
$40$38 thousand, respectively.
The engagement of the independent accountant to render audit, audit-related and non-audit services is entered into pursuant to pre-approval policies and procedures established in the Charter of the Audit Committee of the Company.APWC. Each of the services described in this Item 16C was approved by the Audit Committee.
ITEM 16D:
| EXEMPTIONS FROM THE LISTING STANDARDS FOR THE AUDIT COMMITTEES
|
ITEM 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR THE AUDIT COMMITTEES
The Audit Committee of the Company’s Board of Directors consists of three directors, each of whom is independent, as such term is defined in Regulation 10A-3 promulgated under the Exchange Act, and one of whom is a financial expert.
Item 16E:
| Purchases of Equity Securities by the Issuer and Affiliated Purchasers
|
75
ITEM 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
Not applicable
ITEM 16F:
| CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
|
ITEM 16F: CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable
ITEM 16G:
| CORPORATE GOVERNANCE
|
The Common Shares of the Company are currently traded on the Nasdaq Global Market tier. However, as the Company has a
ITEM 16G: CORPORATE GOVERNANCE
PEWC holds more than fifty percent (50%) shareholder, the Company relies upon50% of our issued and outstanding Common Shares. Accordingly, we are a “controlled company exemption”company” within the meaning of Nasdaq’s corporate governance standards, and may elect to utilize exemptions from certain corporate governance standards, including the requirement (1) that exempts it from having a majority of the board of directors consist of independent directors, (2) to have a nominating committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (3) to have a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. We utilize the controlled company exemption for (1) the requirement to have a majority of our board of directors consist of
independent directors. directors, and (2) the requirement to have a nominating committee that is comprised entirely of independent directors with a written charter addressing such committee’s purpose and responsibilities. While we rely on the controlled company exemption for (2), our independent directors oversee our process for identifying director nominees and review the qualifications of such nominees.
At present, a majority of the directors of the CompanyBoard is affiliated with PEWC. The Company also reliesPEWC, and we rely on Nasdaq’s allowance for foreign private issuers to follow home country practices in lieu of the requirement that listed companies have regularly scheduled meetings at which only independent directors are present (“executive sessions”). TheNonetheless, our independent directors of the Company meet periodically in executive session in their capacity as members of theour Audit Committee of the Board of Directors of the Company without other Directors present, but on occasion meet with theCommittee. Our independent auditors and management occasionally join such meetings, in the interest of the Company present in such executive session, and on occasion meet with members of management present in order to understand more fullycommunicating management’s analysis of the Company’s financial performance and compliance with relevant corporate governance requirements. These are the only material differences between the Company’s
Because we have fewer independent directors (i.e. those who do not meet Nasdaq’s independence standards) on our Board than issuers that comply with all of Nasdaq’s corporate governance practices andstandards, you are not provided the same level of protection afforded to investors in issuers that comply with all of Nasdaq’s corporate governance practices set forthstandards.
As APWC’s majority shareholder, PEWC has sufficient votes to control the outcome of any matter presented for domestic companiesa shareholder vote, including the election of each member of the Board. PEWC may vote its shares in APWC in the manner that it sees fit. In addition, subject to applicable securities laws, PEWC may sell, convey or encumber all or a portion of its ownership interest in APWC without regard to the best interests of APWC’s other shareholders except to the extent that it is prohibited from engaging in conduct oppressive to non-controlling interests under applicable law. The interests of PEWC may conflict with our interests or the Nasdaq rules on the subject matter.interests of our other shareholders. As a result, PEWC may take actions with respect to us or our business that may not be in our or our other shareholders’ best interest.
ITEM 16H:
| MINE SAFETY DISCLOSURE
|
ITEM 16H: MINE SAFETY DISCLOSURE
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable
Part III
ITEM 17:
| FINANCIAL STATEMENTS
|
The
ITEM 17: FINANCIAL STATEMENTS
Our Company has elected to provideprovided the financial statements and related information specified in Item 18 in lieu of Item 17.18.
ITEM 18:
| FINANCIAL STATEMENTS
|
ITEM 18: FINANCIAL STATEMENTS
See pages F-1 –
F-105. | 19.1
| Index to Audited Financial Statements
|
ITEM 19: EXHIBITS
19.1 Index to Audited Financial Statements
Report of independent registered public accounting firm
Consolidated income statements for the years ended December 31,
2019, 20182022, 2021, and
20172020
Consolidated statements of comprehensive income for the years ended December 31,
2019, 20182022, 2021 and
20172020
Consolidated balance sheets as of December 31,
20192022 and
20182021
Consolidated statements of changes in equity for the years ended December 31,
2019, 20182022, 2021 and
20172020
Consolidated statements of cash flows for the years ended December 31,
2019, 20182022, 2021 and
20172020
Notes to consolidated financial statements
19.2 Index to Exhibits
77
| | |
12.2 | | |
| | |
13.1 | | |
| | |
13.2 | | |
| | |
15.1 | | |
| | |
| 101.INS* | Inline XBRL Instance Document. |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| | | | | | | | |
| ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED |
| | |
April 27 , 2020 21, 2023 | /s/ Yuan Chun Tang |
| Name: | Yuan Chun Tang |
| Title: | Chief Executive Officer |
79
Asia Pacific WireASIA PACIFIC WIRE & Cable Corporation LimitedC
ABLE CORPORATION LIMITED
Audited Consolidated Financial Statements
As of December 31,
, 2019 2022 and
20182021
Years ended December 31,
2019, 20182022, 2021 and
20172020
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To theBoard of Directors and Shareholders of Asia Pacific Wire & Cable Corporation Limited: Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Asia Pacific Wire & Cable Corporation Limited and its subsidiaries (the “Company”) as of December 31,
20192022 and
2018,2021, and the related consolidated statements of income, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31,
2019,2022, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
20192022 and
2018,2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
20192022 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.
Change in Accounting Principles
As discussed in Note 4.1 the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019 and the manner in which it accounts for financial instruments and revenue from contracts with customers in 2018.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Estimating Measure of Progress for Supply, Delivery and Installation (“SDI”) Contracts
As described in Note 5 to the consolidated financial statements, the Company’s revenues include revenue from the supply, delivery and installation (“SDI”) of cable to power transmission contracts in Singapore which
amounted to $44.7 million for the year ended December 31, 2022. Revenue occurs when control transfers to the customer, either over a period of time or at a single point in time, depending on the scope of each individual contract. When the transfer of control to the customer occurs over a period of time, revenue of SDI is accounted for using an input method (input costs to total expected input costs) to measure the progress used to determine the amount of related revenue. When the comparison of total contract revenue to total expected input cost indicates a loss, a provision for the entire loss on the contract shall be made in the period in which they become known. Due to the individual nature of the work to be performed on each SDI contract, management’s estimation of total expected input costs is complex and requires significant judgment.
The principal considerations for our determination that performing procedures relating to revenue recognition – estimating measure of progress for supply, delivery and installation is a critical audit matter are there was significant judgment by management when determining the total expected input costs toward complete satisfaction of performance obligation. This in turn led to a high degree of auditor judgment, subjectivity and effort in performing audit procedures and in evaluating audit evidence relating to revenue generated from SDI contracts.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others, (i) testing management’s process for determining the estimate of total costs to complete its contracts, which included evaluating the reasonableness of significant assumptions made by management including materials, direct labor and third party-costs; (ii) evaluating the appropriateness of changes to management’s estimate of total costs to complete throughout the duration of the contract, testing actual direct costs incurred; and (iii) evaluating management’s ability to reasonably estimate the total expected costs to complete contracts, which included performing a comparison of management’s prior period cost estimates to final actual costs.
PricewaterhouseCoopers, Taiwan
We have served as the Company's auditor since 2017.
F-2
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
CONSOLIDATED INCOME STATEMENTS
For the years ended December 31,
2019, 20182022, 2021 and
20172020 | | | | | 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| Note | | US$’000 | | US$’000 | | US$’000 | | | Note | US$’000 | | US$’000 | | US$’000 |
Revenue | 5(e) | | 338,160 | | 425,940 | | 425,215 | | Revenue | 5(e) | 433,893 | | | 476,659 | | | 313,564 | |
| | | | | | | | | | |
Cost of sales | 7(g),13 | | | (313,373 | ) | | (389,692 | ) | | (385,527 | ) | Cost of sales | 7(g),13 | (401,363) | | | (455,508) | | | (279,686) | |
Gross profit | | | | | 24,787 | | | 36,248 | | | 39,688 | | Gross profit | | 32,530 | | | 21,151 | | | 33,878 | |
| | | | | | | | | | |
Other operating income | 7(a) | | 385 | | 805 | | 5,084 | | Other operating income | 7(a) | 1,027 | | | 587 | | | 814 | |
Selling, general and administrative expenses | 7(g) | | (25,051 | ) | | (26,924 | ) | | (27,248 | ) | Selling, general and administrative expenses | 7(g) | (24,978) | | | (26,484) | | | (27,006) | |
Other operating expenses | 7(b) | | | (770 | ) | | (1,445 | ) | | (909 | ) | Other operating expenses | 7(b) | (512) | | | (227) | | | (129) | |
Operating (loss) /profit | | | | | (649 | ) | | 8,684 | | | 16,615 | | |
| Operating profit/(loss) | | Operating profit/(loss) | | 8,067 | | | (4,973) | | | 7,557 | |
| | | | | | | | | | |
Finance costs | 7(c) | | (1,012 | ) | | (1,378 | ) | | (1,221 | ) | Finance costs | 7(c) | (1,650) | | | (1,251) | | | (744) | |
Finance income | 7(d) | | 506 | | 482 | | 876 | | Finance income | 7(d) | 120 | | | 123 | | | 320 | |
Share of loss of associates | | 19 | | (3 | ) | | (3 | ) | | (3 | ) | Share of loss of associates | 19 | (1) | | | (1) | | | (1) | |
Loss on liquidation of a subsidiary | | | | — | | — | | (261 | ) | |
Exchange gain | | | | 1,550 | | 1,741 | | 2,784 | | |
| Exchange gain/(loss) | | Exchange gain/(loss) | | 143 | | | (4,425) | | | (579) | |
Other income | 7(e) | | 717 | | 1,817 | | 214 | | Other income | 7(e) | 889 | | | 671 | | | 1,173 | |
Other expense | 7(f) | | | (3 | ) | | (11 | ) | | (336 | ) | Other expense | 7(f) | (3) | | | (1) | | | (1) | |
Profit before tax | | | | | 1,106 | | | 11,332 | | | 18,668 | | |
| Profit/(loss) before tax | | Profit/(loss) before tax | | 7,565 | | | (9,857) | | | 7,725 | |
| | | | | | | | | | |
Income tax expense | | 8 | | | (2,057 | ) | | (3,886 | ) | | (5,140 | ) | |
(Loss) /Profit for the year | | | | | (951 | ) | | 7,446 | | | 13,528 | | |
| Income tax (expense)/benefit | | Income tax (expense)/benefit | 8 | (2,808) | | | 1,345 | | | (4,016) | |
| Profit/(loss) for the year | | Profit/(loss) for the year | | 4,757 | | | (8,512) | | | 3,709 | |
| | | | | | | | | | | | | | | | | | |
Attributable to: | | | | | | | | | | Attributable to: | |
Equity holders of the parent | | | | (1,632 | ) | | 2,928 | | 8,720 | | Equity holders of the parent | | 3,874 | | | (2,642) | | | (552) | |
Non-controlling interests | | | | | 681 | | | 4,518 | | | 4,808 | | Non-controlling interests | | 883 | | | (5,870) | | | 4,261 | |
| | | | | (951 | ) | | 7,446 | | | 13,528 | | | 4,757 | | | (8,512) | | | 3,709 | |
| | | | | | | | | | | | | | | | | | |
(Loss) /earnings per share | | | | | | | | | | |
Basic and diluted (loss)/profit for the year attributable to equity holders of the parent | | 9 | | $ | (0.12 | ) | $ | 0.21 | | $ | 0.63 | | |
| Earnings/(loss) per share | | Earnings/(loss) per share | |
| Basic and diluted profit/(loss) for the year attributable to equity holders of the parent | | Basic and diluted profit/(loss) for the year attributable to equity holders of the parent | 9 | $ | 0.19 | | | $ | (0.19) | | | $ | (0.04) | |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2019, 20182022, 2021 and 20172020
| | | | 2019 | | 2018 | | 2017 | |
| Note | | US$’000 | | US$’000 | | US$’000 | |
Profit /(loss) for the year | | | | | (951 | ) | | 7,446 | | | 13,528 | |
Other comprehensive income/(loss) | | | | | | | | | | | | |
Other comprehensive income /(loss) to be reclassified to profit or loss in subsequent periods: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Exchange differences on translation of foreign operations, net of tax of $0 | 23(c) | | | 10,677 | | | (4,388 | ) | | 15,882 | |
Cumulative translation differences reclassified to profit or loss on liquidation of a subsidiary | 23(c) | | | — | | | — | | | 248 | |
| | | | | 10,677 | | | (4,388 | ) | | 16,130 | |
Net gain/(loss) on available-for-sale financial assets | | | | | — | | | — | | | (80 | ) |
Income tax effect | | 8 | | | — | | | — | | | 16 | |
Other comprehensive income from available-for-sale financial assets, net of tax | | 22 | | | — | | | — | | | (64 | ) |
| | | | | | | | | | | | |
Other comprehensive income/(loss) not to be reclassified to profit or loss in subsequent periods: | | | | | | | | | | | | |
| | | | | | | | | | | | |
Changes in the fair value of equity instruments measured at fair value through other comprehensive income | 11(d) | | | 1,670 | | | (419 | ) | | — | |
Income tax effect | | 8 | | | (334 | ) | | 84 | | | — | |
Other comprehensive income from equity instruments measured at fair value, net of tax | 22 | | | 1,336 | | | (335 | ) | | — | |
Re-measuring loss on defined benefit plans | | 21 | | | (1,727 | ) | | (410 | ) | | (772 | ) |
Income tax effect | | 8 | | | 345 | | | 82 | | | 154 | |
Defined benefit pension plan, net of tax | | 22 | | | (1,382 | ) | | (328 | ) | | (618 | ) |
| | | | | | | | | | | | |
Other comprehensive income/(loss) for the year, net of tax | | | | | 10,631 | | | (5,051 | ) | | 15,448 | |
| | | | | | | | | | | | |
Total comprehensive income for the year, net of tax | | | | | 9,680 | | | 2,395 | | | 28,976 | |
| | | | | | | | | | | | |
Attributable to: | | | | | | | | | | | | |
Equity holders of the parent | | | | | 3,786 | | | (2,038 | ) | | 18,992 | |
Non-controlling interests | | | | | 5,894 | | | 4,433 | | | 9,984 | |
| | | | | 9,680 | | | 2,395 | | | 28,976 | |
| | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Note | US$’000 | | US$’000 | | US$’000 |
| Profit/(loss) for the year | | 4,757 | | | (8,512) | | | 3,709 | |
| Other comprehensive (loss)/income | | | | | | |
| Other comprehensive (loss)/income to be reclassified to profit or loss in subsequent periods: | | | | | | |
| | | | | | |
| Exchange differences on translation of foreign operations, net of tax of $0 | 23(c) | (9,506) | | | (15,028) | | | 5,211 | |
| | (9,506) | | | (15,028) | | | 5,211 | |
| | | | | | |
| Other comprehensive (loss)/income not to be reclassified to profit or loss in subsequent periods: | | | | | | |
| | | | | | |
| Changes in the fair value of equity instruments measured at fair value through other comprehensive income | 11(d) | (1,352) | | | 734 | | | (1,789) | |
| Income tax effect | 8 | 270 | | | (147) | | | 358 | |
| Other comprehensive (loss)/income from equity instruments measured at fair value, net of tax | 23(c) | (1,082) | | | 587 | | | (1,431) | |
| Re-measuring income on defined benefit plans | 21 | 732 | | | 559 | | | 199 | |
| Income tax effect | 8 | (147) | | | (112) | | | (40) | |
| Defined benefit pension plan, net of tax | 23(c) | 585 | | | 447 | | | 159 | |
| | | | | | |
| Other comprehensive (loss)/income for the year, net of tax | | (10,003) | | | (13,994) | | | 3,939 | |
| | | | | | |
| Total comprehensive (loss)/income for the year, net of tax | | (5,246) | | | (22,506) | | | 7,648 | |
| | | | | | |
| Attributable to: | | | | | | |
| Equity holders of the parent | | (3,827) | | | (10,193) | | | 4,006 | |
| Non-controlling interests | | (1,419) | | | (12,313) | | | 3,642 | |
| | (5,246) | | | (22,506) | | | 7,648 | |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
CONSOLIDATED BALANCE SHEETS
As of December 31, 20192022 and 20182021
| | | | | As of December 31, | | | As of December 31, |
| | | | 2019 | | 2018 | | | 2022 | | 2021 |
| Note | | US$’000 | | US$’000 | | | Note | | US$’000 | | US$’000 |
Assets | | | | | | | | | Assets | |
Current assets | | | | | | | | | Current assets | |
Cash and cash equivalents | | 10 | | | 53,673 | | 60,778 | | |
| Cash and cash equivalents(excluding bank overdrafts) | | Cash and cash equivalents(excluding bank overdrafts) | 10 | | 54,017 | | | 44,507 | |
| Financial assets at fair value through profit or loss | | Financial assets at fair value through profit or loss | 11 | | 39 | | | 249 | |
Trade receivables | | 12 | | | 74,077 | | 79,617 | | Trade receivables | 12 | | 81,982 | | | 103,564 | |
Other receivables | 12,27(e) | | | 6,868 | | 12,422 | | Other receivables | 12,27(e) | | 2,397 | | | 2,648 | |
Contract assets | | 14 | | | 4,686 | | 1,460 | | Contract assets | 14 | | 12,450 | | | 11,381 | |
Due from related parties | | 24 | | | 11,566 | | 12,061 | | Due from related parties | 24 | | 11,018 | | | 13,965 | |
Inventories | | 13 | | | 85,187 | | 83,925 | | Inventories | 13 | | 130,608 | | | 128,797 | |
Prepayments | 16(c) | | | 1,926 | | 1,140 | | Prepayments | | 3,341 | | | 2,526 | |
Other current assets | | | | | 1,521 | | | 2,745 | | Other current assets | | 3,673 | | | 4,366 | |
| | | | | 239,504 | | | 254,148 | | | 299,525 | | | 312,003 | |
Non-current assets | | | | | | | | | Non-current assets | |
Financial assets at fair value through other comprehensive income | 11,26 | | | 4,062 | | 2,332 | | Financial assets at fair value through other comprehensive income | 11,26 | | 1,553 | | | 2,929 | |
Property, plant and equipment | 15,27(e) | | | 41,747 | | 41,418 | | Property, plant and equipment | 15,27(e) | | 50,713 | | | 54,419 | |
Right-of-use assets | 16(a) | | | 3,735 | | — | | |
Prepaid land lease payments | 16(c) | | | — | | 978 | | |
| Right of use assets | | Right of use assets | 16(a) | | 3,432 | | | 3,393 | |
Investment properties | 7(a),17,26 | | | 730 | | 720 | | Investment properties | 17,26 | | 5,250 | | | 5,809 | |
Intangible assets | | 18 | | | 128 | | 157 | | Intangible assets | 18 | | 139 | | | 129 | |
Investments in associates | | 19 | | | 935 | | 864 | | Investments in associates | 19 | | 805 | | | 835 | |
Deferred tax assets | | 8 | | | 3,939 | | 3,919 | | Deferred tax assets | 8 | | 7,143 | | | 7,241 | |
Other non-current assets | | | | | 4,131 | | | 1,262 | | Other non-current assets | | 2,459 | | | 2,670 | |
| | | | | 59,407 | | | 51,650 | | | 71,494 | | | 77,425 | |
Total assets | | | | | 298,911 | | | 305,798 | | Total assets | | 371,019 | | | 389,428 | |
| | | | | | | | | | | | | |
Liabilities | | | | | | | | | Liabilities | |
Current liabilities | | | | | | | | | Current liabilities | |
Interest-bearing loans and borrowings | 11(b) | | | 11,356 | | 24,814 | | Interest-bearing loans and borrowings | 11(b) | | 45,576 | | | 62,083 | |
Trade and other payables | | 20 | | | 16,879 | | 21,127 | | Trade and other payables | 20 | | 39,891 | | | 44,784 | |
Due to related parties | | 24 | | | 3,284 | | 2,997 | | Due to related parties | 24 | | 16,613 | | | 11,865 | |
Financial liabilities at fair value through profit or loss | 11,26 | | | 3 | | 142 | | Financial liabilities at fair value through profit or loss | 11,26 | | 6 | | | — | |
Accruals | | | | | 14,437 | | 14,197 | | Accruals | | 21,218 | | | 23,374 | |
Current tax liabilities | | 8 | | | 2,872 | | 3,863 | | Current tax liabilities | 8 | | 2,432 | | | 3,394 | |
Employee benefit liabilities | | 21 | | | 1,888 | | 1,282 | | Employee benefit liabilities | 21 | | 1,947 | | | 1,987 | |
Lease liabilities | 11(d) | | 574 | | 44 | | Lease liabilities | 11(d) | | 627 | | | 571 | |
Other current liabilities | 22 | | | 2,356 | | | 3,272 | | Other current liabilities | 22 | | 5,289 | | | 14,135 | |
| | | | | 53,649 | | | 71,738 | | | 133,599 | | | 162,193 | |
Non-current liabilities | | | | | | | | | Non-current liabilities | |
| Interest-bearing loans and borrowings | | Interest-bearing loans and borrowings | 11(b) | | 12,155 | | | 3,304 | |
Employee benefit liabilities | | 21 | | | 10,434 | | 8,273 | | Employee benefit liabilities | 21 | | 7,693 | | | 8,593 | |
Lease liabilities | 11(d) | | 2,254 | | 46 | | Lease liabilities | 11(d) | | 1,947 | | | 1,916 | |
Deferred tax liabilities | | 8 | | | 4,139 | | | 3,925 | | Deferred tax liabilities | 8 | | 4,197 | | | 4,105 | |
| | | | | 16,827 | | | 12,244 | | | 25,992 | | | 17,918 | |
Total liabilities | | | | | 70,476 | | | 83,982 | | Total liabilities | | 159,591 | | | 180,111 | |
| | | | | | | | | | | | | |
Equity | | 23 | | | | | | | Equity | 23 | |
Issued capital | | | | | 138 | | 138 | | Issued capital | | 206 | | | 138 | |
Additional paid-in capital | | | | | 110,416 | | 110,376 | | Additional paid-in capital | | 118,103 | | | 110,249 | |
Treasury shares | | | | | (38 | ) | | (38 | ) | Treasury shares | | (38) | | | (38) | |
Retained earnings | | | | | 53,384 | | 55,016 | | Retained earnings | | 54,064 | | | 50,190 | |
Other components of equity | | | | | (10,046 | ) | | (15,464 | ) | Other components of equity | | (20,740) | | | (13,039) | |
Equity attributable to equity holders of the parent | | | | | 153,854 | | | 150,028 | | Equity attributable to equity holders of the parent | | 151,595 | | | 147,500 | |
Non-controlling interests | | 6 | | | 74,581 | | | 71,788 | | Non-controlling interests | 6 | | 59,833 | | | 61,817 | |
Total equity | | | | | 228,435 | | | 221,816 | | Total equity | | 211,428 | | | 209,317 | |
Total liabilities and equity | | | | | 298,911 | | | 305,798 | | Total liabilities and equity | | 371,019 | | | 389,428 | |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the years ended December 31, 2019, 20182022, 2021 and 20172020
| | Attributable to the equity holders of the parent | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Issued capital | | Additional paid-in capital | | Treasury shares | | Retained earnings | | Remeasurement of defined benefit plans | | Available-for-sale reserve | | Financial assets at FVOCI reserve | | Foreign currency translation reserve | | Total | | Non-controlling interests | | Total equity | | | Attributable to the equity holders of the parent | |
| Note | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | | Issued
capital | | Additional
paid-in
capital | | Treasury
shares | | Retained
earnings | | Remeasurement of
defined
benefit plans | | Financial assets at FVOCI reserve | | Foreign
currency
translation
reserve | | Total | | Non-controlling
interests | | Total
equity |
Balance at January 1, 2017 | | | 138 | | 110,608 | | (38 | ) | | 46,012 | | (435 | ) | | 907 | | — | | (21,242 | ) | | 135,950 | | 61,225 | | 197,175 | | |
Net profit | | | — | | — | | — | | 8,720 | | — | | — | | — | | — | | 8,720 | | 4,808 | | 13,528 | | |
Other comprehensive income/(loss) | 23 | | — | | | — | | | — | | | — | | | (315 | ) | | (33 | ) | | — | | | 10,620 | | | 10,272 | | | 5,176 | | | 15,448 | | |
Total comprehensive income/(loss) | | | — | | | — | | | — | | | 8,720 | | | (315 | ) | | (33 | ) | | — | | | 10,620 | | | 18,992 | | | 9,984 | | | 28,976 | | |
Dividend paid | 23 | | — | | — | | — | | (1,382 | ) | | — | | — | | — | | — | | (1,382 | ) | | (1,943 | ) | | (3,325 | ) | |
Effect from the changes in shareholding percentage in subsidiary | 2.2 | | — | | | (232 | ) | | — | | | — | | | — | | | — | | | — | | | — | | | (232 | ) | | 232 | | | — | | |
Balance at December 31, 2017 | | | 138 | | | 110,376 | | | (38 | ) | | 53,350 | | | (750 | ) | | 874 | | | — | | | (10,622 | ) | | 153,328 | | | 69,498 | | | 222,826 | | |
Reclassification on adoption of IFRS 9 and IFRS 15 | 4.1 | | — | | | — | | | — | | | (156 | ) | | — | | | (874 | ) | | 874 | | | — | | | (156 | ) | | 63 | | | (93 | ) | |
Balance at January 1, 2018 | | | 138 | | | 110,376 | | | (38 | ) | | 53,194 | | | (750 | ) | | — | | | 874 | | | (10,622 | ) | | 153,172 | | | 69,561 | | | 222,733 | | |
| | | Note | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Balance at January 1, 2020 | | Balance at January 1, 2020 | | 138 | | | 110,416 | | | (38) | | | 53,384 | | | (1,621) | | | 1,384 | | | (9,809) | | | 153,854 | | | 74,581 | | | 228,435 | |
Net profit | | | — | | — | | — | | 2,928 | | — | | — | | — | | — | | 2,928 | | 4,518 | | 7,446 | | Net profit | | — | | | — | | | — | | | (552) | | | — | | | — | | | — | | | (552) | | | 4,261 | | | 3,709 | |
Other comprehensive income/(loss) | 23 | | — | | | — | | | — | | | — | | | (167 | ) | | — | | | (170 | ) | | (4,629 | ) | | (4,966 | ) | | (85 | ) | | (5,051 | ) | Other comprehensive income/(loss) | 23 | — | | | — | | | — | | | — | | | 81 | | | (729) | | | 5,206 | | | 4,558 | | | (619) | | | 3,939 | |
Total comprehensive income/(loss) | | | — | | | — | | | — | | | 2,928 | | | (167 | ) | | — | | | (170 | ) | | (4,629 | ) | | (2,038 | ) | | 4,433 | | | 2,395 | | Total comprehensive income/(loss) | | — | | | — | | | — | | | (552) | | | 81 | | | (729) | | | 5,206 | | | 4,006 | | | 3,642 | | | 7,648 | |
Dividends paid | 23 | | — | | | — | | | — | | | (1,106 | ) | | — | | | — | | | — | | | — | | | (1,106 | ) | | (2,206 | ) | | (3,312 | ) | Dividends paid | 23 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,208) | | | (1,208) | |
Balance at December 31, 2018 | | | 138 | | | 110,376 | | | (38 | ) | | 55,016 | | | (917 | ) | | — | | | 704 | | | (15,251 | ) | | 150,028 | | | 71,788 | | | 221,816 | | |
| Balance at December 31, 2020 | | Balance at December 31, 2020 | | 138 | | | 110,416 | | | (38) | | | 52,832 | | | (1,540) | | | 655 | | | (4,603) | | | 157,860 | | | 77,015 | | | 234,875 | |
Net loss | | | — | | — | | — | | (1,632 | ) | | — | | — | | — | | — | | (1,632 | ) | | 681 | | (951 | ) | Net loss | | — | | | — | | | — | | | (2,642) | | | — | | | — | | | — | | | (2,642) | | | (5,870) | | | (8,512) | |
Other comprehensive income/(loss) | 23 | | — | | | — | | | — | | | — | | | (704 | ) | | — | | | 680 | | | 5,442 | | | 5,418 | | | 5,213 | | | 10,631 | | Other comprehensive income/(loss) | 23 | — | | | — | | | — | | | — | | | 228 | | | 300 | | | (8,079) | | | (7,551) | | | (6,443) | | | (13,994) | |
Total comprehensive income/(loss) | | | — | | | — | | | — | | | (1,632 | ) | | (704 | ) | | — | | | 680 | | | 5,442 | | | 3,786 | | | 5,894 | | | 9,680 | | Total comprehensive income/(loss) | | — | | | — | | | — | | | (2,642) | | | 228 | | | 300 | | | (8,079) | | | (10,193) | | | (12,313) | | | (22,506) | |
Dividends paid | 23 | | — | | — | | — | | — | | — | | — | | — | | — | | — | | (2,763 | ) | | (2,763 | ) | Dividends paid | 23 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (2,817) | | | (2,817) | |
Effect from the changes in shareholding percentage in subsidiary | 2.2 | | — | | | 40 | | | — | | | — | | | — | | | — | | | — | | | — | | | 40 | | | (338 | ) | | (298 | ) | Effect from the changes in shareholding percentage in subsidiary | | — | | | (167) | | | — | | | — | | | — | | | — | | | — | | | (167) | | | (68) | | | (235) | |
Balance at December 31, 2019 | | | 138 | | | 110,416 | | | (38 | ) | | 53,384 | | | (1,621 | ) | | — | | | 1,384 | | | (9,809 | ) | | 153,854 | | | 74,581 | | | 228,435 | | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | | 138 | | | 110,249 | | | (38) | | | 50,190 | | | (1,312) | | | 955 | | | (12,682) | | | 147,500 | | | 61,817 | | | 209,317 | |
| Net profit | | Net profit | | — | | | — | | | — | | | 3,874 | | | — | | | — | | | — | | | 3,874 | | | 883 | | | 4,757 | |
| Other comprehensive income/(loss) | | Other comprehensive income/(loss) | 23 | — | | | — | | | — | | | — | | | 298 | | | (551) | | | (7,448) | | | (7,701) | | | (2,302) | | | (10,003) | |
| Total comprehensive income/(loss) | | Total comprehensive income/(loss) | | — | | | — | | | — | | | 3,874 | | | 298 | | | (551) | | | (7,448) | | | (3,827) | | | (1,419) | | | (5,246) | |
| Issuance of common stock for cash | | Issuance of common stock for cash | 23 | 68 | | | 7,854 | | | — | | | — | | | — | | | — | | | — | | | 7,922 | | | — | | | 7,922 | |
| Dividends paid | | Dividends paid | 23 | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (565) | | | (565) | |
| Balance at December 31, 2022 | | Balance at December 31, 2022 | | 206 | | | 118,103 | | | (38) | | | 54,064 | | | (1,014) | | | 404 | | | (20,130) | | | 151,595 | | | 59,833 | | | 211,428 | |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2019, 2018,2022, 2021, and 20172020
| | | | | 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| Note | | US$’000 | | US$’000 | | US$’000 | | | Note | US$’000 | | US$’000 | | US$’000 |
Operating activities: | | | | | | | | | | Operating activities: | |
Profit before tax | | | | 1,106 | | 11,332 | | 18,668 | | |
| Profit/(loss) before tax | | Profit/(loss) before tax | | 7,565 | | | (9,857) | | | 7,725 | |
Adjustments to reconcile profit before tax to net cash provided by operating activities: | | | | | | | | | | Adjustments to reconcile profit before tax to net cash provided by operating activities: | |
Depreciation | 15,16,17 | | 5,274 | | 4,936 | | 4,972 | | Depreciation | 15,16,17 | 5,790 | | | 5,447 | | | 5,340 | |
Impairment of property, plant and equipment | | 15 | | 546 | | 11 | | 223 | | Impairment of property, plant and equipment | 15 | — | | | 7 | | | 202 | |
Amortization of prepaid land lease payments | | 16 | | — | | 38 | | 35 | | |
Amortization of intangible assets | | 18 | | 50 | | 44 | | 49 | | Amortization of intangible assets | 18 | 45 | | | 47 | | | 62 | |
Gain on disposal of property, plant and equipment | 7(a) | | (88 | ) | | (93 | ) | | (99 | ) | Gain on disposal of property, plant and equipment | 7(a) | (132) | | | (318) | | | (239) | |
Gain on disposal of assets classified as held for sale | 7(a) | | — | | — | | (4,525 | ) | Gain on disposal of assets classified as held for sale | 7(a) | (240) | | | — | | | — | |
Adjustment for loss (gain) on fair value of derivatives | 7(e),7(f) | | (146 | ) | | 2 | | 332 | | |
| Gain on disposal of investment property | | Gain on disposal of investment property | 7(a) | (271) | | | — | | | — | |
| Adjustment for on fair value of derivatives | | Adjustment for on fair value of derivatives | 7(e),7(f) | (33) | | | (259) | | | (3) | |
Dividend income | 7(e) | | (109 | ) | | (105 | ) | | (100 | ) | Dividend income | 7(e) | (97) | | | (106) | | | (108) | |
Finance income | 7(d) | | (506 | ) | | (482 | ) | | (876 | ) | Finance income | 7(d) | (120) | | | (123) | | | (320) | |
Finance costs | 7(c) | | 1,012 | | 1,378 | | 1,221 | | Finance costs | 7(c) | 1,650 | | | 1,251 | | | 744 | |
Share of loss of associates | | 19 | | 3 | | 3 | | 3 | | Share of loss of associates | 19 | 1 | | | 1 | | | 1 | |
Impairment (reversal of impairment) for trade receivables | 12(a) | | (122 | ) | | 570 | | 302 | | Impairment (reversal of impairment) for trade receivables | 7(b),12(a) | 509 | | | 205 | | | 124 | |
Impairment for trade receivables for related parties | 7(b) | | — | | 1 | | 27 | | |
| Impairment (reversal of impairment) for trade receivables for related parties | | Impairment (reversal of impairment) for trade receivables for related parties | 7(a),7(b) | (1) | | | 15 | | | (11) | |
Impairment of other receivable | 7(b) | | 30 | | 53 | | — | | Impairment of other receivable | 7(a) | — | | | — | | | (80) | |
Impairment (write-back of impairment) of inventories | | 13 | | (322 | ) | | 1,613 | | 532 | | Impairment (write-back of impairment) of inventories | 13 | (1,119) | | | 14,136 | | | (240) | |
Unrealized foreign exchange difference, net | | | | (503 | ) | | (742 | ) | | (1,771 | ) | Unrealized foreign exchange difference, net | | 245 | | | 1,784 | | | 411 | |
Loss on liquidation of subsidiary | | | | — | | — | | 261 | | |
| Noncash other operating income | | Noncash other operating income | | — | | | — | | | (60) | |
| (Gain) on lease modification | | (Gain) on lease modification | | (74) | | | (2) | | | — | |
Changes in operating assets and liabilities | | | | | | | | | | Changes in operating assets and liabilities | |
Trade and other receivable, net | | | | 16,031 | | 27,993 | | (17,438 | ) | Trade and other receivable, net | | 16,720 | | | (25,739) | | | (1,899) | |
Contract assets | | | | (3,160 | ) | | (1,317 | ) | | — | | Contract assets | | (952) | | | (1,387) | | | (5,242) | |
Inventories | | | | 3,166 | | 10,339 | | (11,523 | ) | Inventories | | (4,389) | | | (53,857) | | | (8,828) | |
Prepayment and other current assets | | | | 484 | | 133 | | 123 | | Prepayment and other current assets | | (35) | | | (886) | | | (1,928) | |
Amounts due to/from related parties | | | | 1,177 | | (1,422 | ) | | 2,733 | | Amounts due to/from related parties | | 807 | | | 3,911 | | | 2,777 | |
Other non-current assets | | | | (238 | ) | | (55 | ) | | 77 | | Other non-current assets | | (54) | | | (169) | | | 42 | |
Trade and other payables, accruals, other current liabilities and other non-current liabilities | | | | | (5,527 | ) | | (8,518 | ) | | (6,778 | ) | Trade and other payables, accruals, other current liabilities and other non-current liabilities | | (14,035) | | | 28,896 | | | 19,917 | |
Net cash flows (used in) provided by operating activities | | | | | 18,158 | | | 45,712 | | | (13,552 | ) | |
| Net cash flows provided by/(used in) operating activities | | Net cash flows provided by/(used in) operating activities | | 11,780 | | | (37,003) | | | 18,387 | |
Dividend received | | | | 109 | | 105 | | 100 | | Dividend received | | 97 | | | 106 | | | 108 | |
Interest received | | | | 457 | | 405 | | 858 | | Interest received | | 119 | | | 131 | | | 1,199 | |
Interest paid | | | | (894 | ) | | (1,216 | ) | | (1,043 | ) | Interest paid | | (1,475) | | | (1,078) | | | (613) | |
Income tax paid | | | | | (2,690 | ) | | (4,357 | ) | | (2,787 | ) | Income tax paid | | (3,955) | | | (3,768) | | | (2,706) | |
Net cash provided (used in) by operating activities | | | | | 15,140 | | | 40,649 | | | (16,424 | ) | |
| Net cash provided/(used in) by operating activities | | Net cash provided/(used in) by operating activities | | 6,566 | | | (41,612) | | | 16,375 | |
Investing activities: | | | | | | | | | | Investing activities: | |
Purchases of property, plant and equipment | | 28 | | (5,442 | ) | | (4,441 | ) | | (4,903 | ) | Purchases of property, plant and equipment | 28 | (3,746) | | | (8,547) | | | (14,537) | |
Purchases of intangible assets | | 18 | | (20 | ) | | (67 | ) | | (10 | ) | Purchases of intangible assets | 18 | (62) | | | (4) | | | (67) | |
Purchases of investment properties | | 17 | | — | | — | | (84 | ) | Purchases of investment properties | 17 | (12) | | | — | | | (1,762) | |
Purchases of long-term bank deposits | | | | (272 | ) | | (410 | ) | | (475 | ) | Purchases of long-term bank deposits | | — | | | (38) | | | (610) | |
Purchases of short-term bank deposits | | | | (835 | ) | | — | | — | | Purchases of short-term bank deposits | | — | | | (1,364) | | | (3,617) | |
Proceeds from disposal of held for sale assets | 7(a) | | — | | — | | 8,011 | | Proceeds from disposal of held for sale assets | | 241 | | | — | | | — | |
Proceeds from disposal of property, plant and equipment | | | | 171 | | 100 | | 510 | | Proceeds from disposal of property, plant and equipment | | 204 | | | 399 | | | 297 | |
Proceeds from disposal of other financial assets-held to maturity | | | | | — | | | — | | | 340 | | |
Net cash (used in) provided by investing activities | | | | | (6,398 | ) | | (4,818 | ) | | 3,389 | | |
Financing activities: | | | | | | | | | | |
Dividend paid to non-controlling shareholders of subsidiaries | | | | (2,763 | ) | | (2,206 | ) | | (1,943 | ) | |
Dividend paid to company's shareholders | 23(b) | | — | | (1,106 | ) | | (1,382 | ) | |
Repayments of borrowings | | | | (19,811 | ) | | (25,737 | ) | | (17,306 | ) | |
Proceeds from borrowings | | | | 5,349 | | 9,517 | | 27,714 | | |
Change in financial lease liabilities | | | | — | | (46 | ) | | (41 | ) | |
Principal elements of lease payments | | 28 | | (426 | ) | | — | | — | | |
Effect from the changes in shareholding percentage in subsidiary | | | | | (298 | ) | | — | | | — | | |
Net cash (used in) provided by financing activities | | | | | (17,949 | ) | | (19,578 | ) | | 7,042 | | |
Effect of exchange rate | | | | | 2,102 | | | (1,568 | ) | | 3,855 | | |
Net (decrease) increase in cash and cash equivalents | | | | | (7,105 | ) | | 14,685 | | | (2,138 | ) | |
Cash and cash equivalents at beginning of year | | 10 | | | 60,778 | | | 46,093 | | | 48,231 | | |
Cash and cash equivalents at end of year | | 10 | | | 53,673 | | | 60,778 | | | 46,093 | | |
| Proceeds from disposal of investment property | | Proceeds from disposal of investment property | | 301 | | | — | | | — | |
| Proceeds from maturities of long-term bank deposits | | Proceeds from maturities of long-term bank deposits | | 307 | | | — | | | — | |
| Proceeds from maturities of short-term bank deposits | | Proceeds from maturities of short-term bank deposits | | 112 | | | 3,401 | | | — | |
| Net cash used in investing activities | | Net cash used in investing activities | | (2,655) | | | (6,153) | | | (20,296) | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the years ended December 31, 2022, 2021, and 2020
| | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| Note | US$’000 | | US$’000 | | US$’000 |
| Financing activities: | | | | | | |
| Dividend paid to non-controlling shareholders of subsidiaries | | (565) | | | (2,817) | | | (1,208) | |
| Issuance of common stock for cash | 23 | 7,922 | | | — | | | — | |
| Repayments of borrowings | | (19,278) | | | (11,819) | | | (5,037) | |
| Repayments of borrowings - related parties | | — | | | (6,000) | | | (639) | |
| Proceeds from borrowings | | 22,167 | | | 63,915 | | | 3,531 | |
| Proceeds from borrowings - related parties | | — | | | — | | | 6,000 | |
| Principal elements of lease payments | 28 | (616) | | | (632) | | | (586) | |
| Effect from the changes in shareholding percentage in subsidiary | | — | | | (235) | | | — | |
| Net cash provided by financing activities | | 9,630 | | | 42,412 | | | 2,061 | |
| Effect of exchange rate | | (2,036) | | | (4,372) | | | 424 | |
| Net increase (decrease) in cash and cash equivalents | | 11,505 | | | (9,725) | | | (1,436) | |
| Cash and cash equivalents at beginning of year | 10 | 42,512 | | | 52,237 | | | 53,673 | |
| Cash and cash equivalents at end of year | 10 | 54,017 | | | 42,512 | | | 52,237 | |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1.
| PRINCIPAL ACTIVITIES AND CORPORATE INFORMATION
|
1. PRINCIPAL ACTIVITIES AND CORPORATE INFORMATION
Asia Pacific Wire & Cable Corporation Limited (“APWC”
or the “Company”), which is a subsidiary of Pacific Electric Wire & Cable Co., Ltd. (“PEWC”), a Taiwanese company, was incorporated as an exempted company in Bermuda on September 19, 1996 under the Companies Act 1981 of Bermuda (as amended) for the purpose of acting as a holding company.
The CompanyAPWC is principally engaged in owning operating companies engaged in the power cable, telecommunication cable, enameled wire and electronic cable industry.
The Company’sAPWC’s registered office is located at Victoria Place, 5th Floor, 31 Victoria Street, Hamilton HM 10, Bermuda.
The Company’sAPWC’s executive business office is presently located in Taipei, Taiwan.
The Company’s
APWC’s operating subsidiaries (the “Operating Subsidiaries”) are engaged in the manufacturing and distribution of telecommunications, power cable and enameled wire products in Singapore, Thailand, Australia, the People’s Republic of China (“PRC”) and other markets in the Asia Pacific region. Major customers of the Operating Subsidiaries include government organizations, electric contracting firms, electrical dealers, and wire and cable factories. The
Company’s Operating Subsidiaries also engage in the distribution of certain wire and cable products manufactured by PEWC and third parties. The
CompanyOperating Subsidiaries also provides project engineering services in supply, delivery and installation (the “SDI”) of power cable to certain of its customers.
Since 1997,
the CompanyAPWC has been a U.S. public company with its common shares registered with the Securities and Exchange Commission (the “SEC” or the “Commission”). On April 29, 2011,
the Company’sAPWC’s common shares commenced trading on Nasdaq Capital Market tier. On February 15, 2013,
the Company’sAPWC’s common shares started trading on the Nasdaq Global Market tier.
On July 24, 2020, APWC transferred its listing of common shares to the Nasdaq Capital Market tier because of failing to meet the minimum Market Value of Publicly Held Shares ("MVPHS") requirement to continue listing on the Nasdaq Global Market.
On January 14, 2022, APWC distributed subscription rights without charges to its shareholder to purchase additional common shares of APWC. On February 2, 2022, APWC announced the completion of this rights offering, which was oversubscribed. In the rights offering, APWC issued and sold 6,796,558 common shares at $1.22 per share pursuant to the exercise of subscription rights, raising net proceeds of $7.9 million after deducting offering expenses. Following the completion of the rights offering, APWC had 20,616,227 common shares outstanding.
PEWC is currently holding
75.4%80.96% of the equity of
the CompanyAPWC and is
the Company’sAPWC’s ultimate parent company
Share Capital Repurchase Program
The Company’s
APWC’s Board of Directors authorized a share capital repurchase program on August 28, 2012. During 2012 and 2013,
the CompanyAPWC repurchased 11,100 shares with total considerations of $38 until
the CompanyAPWC suspended the share capital repurchase program as of June 30, 2013.
The CompanyAPWC records the value of its common shares held in the treasury at cost.
On August 13, 2014,
the CompanyAPWC announced that its Board of Directors authorized the future implementation of a share repurchase program of up to $1 million worth of its Common Shares.
The CompanyAPWC did not announce a commencement date for that future share repurchase program, and, to date, it has not yet been implemented, and no financial liability has been recognized.
2. BASIS OF PREPARATION
2.1 The consolidated financial statements are prepared in accordance with International Financial Reporting Standard (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| 2.1
| 2. BASIS OF PREPARATION (continued)The consolidated financial statements are prepared in accordance with International Financial Reporting Standard (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). |
The financial statements have been prepared on a historical basis except where otherwise disclosed in the accounting policies. The consolidated financial statements are presented in U.S. dollars and all valuesvalues are rounded to the nearest thousand (US$’000), except when otherwise indicated.
| 2.2
| 2.2 Basis of consolidation |
The consolidated financial statements comprise the financial statements of
the CompanyAPWC and its subsidiaries
(collectively as “our Company”) as of December 31,
20192022 and
2018,2021, and the results of operations of
theour Company
and all subsidiaries for the years ended December 31,
2019, 20182022, 2021 and
2017.2020.
Subsidiaries are fully consolidated from the date of acquisition (the date on which
theour Company obtains control), and continue to be consolidated until the date that such control ceases.
TheOur Company controls an entity when
theour Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. All intra-group balances, transactions, unrealized gains and losses and dividends resulting from intra-group transactions are eliminated in full.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated income statements, statements of comprehensive income, statements of changes in equity and balance sheets, respectively. Total comprehensive income (loss) within a subsidiary is attributed to the non-controlling interest even if it results in a deficit balance.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If
theour Company loses control over a subsidiary, it:
| ►
| Derecognizes the assets (including goodwill) and liabilities of the subsidiary
|
| ►
| Derecognizes the carrying amount of any non-controlling interest
|
uDerecognizes the assets (including goodwill) and liabilities of the subsidiary | ►
| Derecognizes the cumulative transaction differences recorded in equity
|
uDerecognizes the carrying amount of any non-controlling interest | ►
| Recognizes the fair value of the consideration received
|
uDerecognizes the cumulative transaction differences recorded in equity | ►
| Recognizes the fair value of any investment retained
|
uRecognizes the fair value of the consideration received | ►
| Recognizes any surplus or deficit in profit or loss
|
uRecognizes the fair value of any investment retained | ►
| Reclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if the Company had directly disposed of the related assets or liability.
|
uRecognizes any surplus or deficit in profit or lossF-9
uReclassifies the parent’s share of components previously recognized in other comprehensive income to profit or loss or retained earnings, as appropriate, as would be required if our Company had directly disposed of the related assets or liability.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.
| BASIS OF PREPARATION (continued)
|
| 2.2
| Basis of consolidation2. BASIS OF PREPARATION (continued)
|
2.2 Basis of consolidation (continued)
The subsidiaries of
theour Company are set out below:
| | Percentage of equity interest | |
Place of incorporation and operations | | 2019 | | | 2018 | |
The British Virgin Islands | | | | | | | | |
APWC General Holdings Limited | | | 100 | % | | | 100 | % |
PRC (APWC) Holding Ltd. | | | 100 | % | | | 100 | % |
Samray Inc. | | | 100 | % | | | 100 | % |
Siam (APWC) Holdings Ltd. | | | 100 | % | | | 100 | % |
Moon View Ltd. | | | 100 | % | | | 100 | % |
Trigent Investment Holdings Limited | | | 100 | % | | | 100 | % |
Crown Century Holdings Ltd. | | | 100 | % | | | 100 | % |
Singapore | | | | | | | | |
Sigma Cable Company (Private) Limited (“Sigma Cable”) | | | 98.30 | % | | | 98.30 | % |
Epan Industries Pte Ltd. | | | 98.30 | % | | | 98.30 | % |
Singvale Pte Ltd. | | | 100 | % | | | 100 | % |
The People’s Republic of China (“PRC”) | | | | | | | | |
Ningbo Pacific Cable Co., Ltd. (“Ningbo Pacific”) | | | 97.93 | % | | | 97.93 | % |
Shanghai Yayang Electric Co., Ltd. (“SYE”) | | | 68.75 | % | | | 68.75 | % |
Pacific Electric Wire & Cable (Shenzhen) Co., Ltd. (“PEWS”) | | | 97.93 | % | | | 97.93 | % |
Hong Kong | | | | | | | | |
Crown Century Holdings Limited (“CCH (HK)”) | | | 97.93 | % | | | 97.93 | % |
Australia | | | | | | | | |
Australia Pacific Electric Cable Pty Limited (“APEC”) | | | 98.06 | % | | | 98.06 | % |
Thailand | | | | | | | | |
Charoong Thai Wire and Cable Public Company Limited (“Charoong Thai”) (i) | | | 50.93 | % | | | 50.93 | % |
Siam Pacific Electric Wire & Cable Company Limited (“Siam Pacific”) | | | 50.93 | % | | | 50.93 | % |
Double D Cable Company Limited (“Double D”) | | | 50.93 | % | | | 50.93 | % |
Hard Lek Limited. | | | 73.98 | % | | | 73.98 | % |
APWC (Thailand) Co., Ltd. | | | 99.48 | % | | | 99.48 | % |
PEWC (Thailand) Co., Ltd. | | | 99.48 | % | | | 99.48 | % |
CTW Beta Co., Ltd. | | | 50.89 | % | | | 50.89 | % |
Siam Fiber Optics Co., Ltd. (“SFO”) (ii) | | | 45.84 | % | | | 30.56 | % |
Taiwan | | | | | | | | |
Asia Pacific New Energy Corporation Limited ("APNEC") (iii) | | | 100.00 | % | | | 100.00 | % |
YASHIN Energy Corporation Limited ("YASHIN") (iii) | | | 100.00 | % | | | 100.00 | % |
YADING Energy Corporation Limited ("YADING") (iii) | | | 100.00 | % | | | 100.00 | % |
F-10
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2.
| BASIS OF PREPARATION (continued)
|
| 2.2
| Basis of consolidation (continued)
|
| | | | | | | | | | | | | | |
| | Percentage of equity interest |
| Place of incorporation and operations | | 2022 | | 2021 |
| The British Virgin Islands | | | | |
| APWC General Holdings Limited | | 100 | % | | 100 | % |
| PRC (APWC) Holding Ltd. | | 100 | % | | 100 | % |
| Samray Inc. | | 100 | % | | 100 | % |
| Siam (APWC) Holdings Ltd. | | 100 | % | | 100 | % |
| Moon View Ltd. | | 100 | % | | 100 | % |
| Trigent Investment Holdings Limited | | 100 | % | | 100 | % |
| Crown Century Holdings Ltd. | | 100 | % | | 100 | % |
| Singapore | | | | |
| Sigma Cable Company (Private) Limited (“Sigma Cable”) | | 98.30 | % | | 98.30 | % |
| Epan Industries Pte Ltd. | | 98.30 | % | | 98.30 | % |
| Singvale Pte Ltd. | | 100 | % | | 100 | % |
| The People’s Republic of China (“PRC”) | | | | |
| Ningbo Pacific Cable Co., Ltd. (“Ningbo Pacific”) | | 97.93 | % | | 97.93 | % |
| Shanghai Yayang Electric Co., Ltd. (“SYE”) | | 68.75 | % | | 68.75 | % |
| Pacific Electric Wire & Cable (Shenzhen) Co., Ltd. (“PEWS”) | | 97.93 | % | | 97.93 | % |
| Hong Kong | | | | |
| Crown Century Holdings Limited (“CCH (HK)”) | | 97.93 | % | | 97.93 | % |
| Australia | | | | |
| Australia Pacific Electric Cable Pty Limited (“APEC”) | | 98.06 | % | | 98.06 | % |
| Thailand | | | | |
| Charoong Thai Wire and Cable Public Company Limited (“Charoong Thai”) (i) | | 50.93 | % | | 50.93 | % |
| Siam Pacific Electric Wire & Cable Company Limited (“Siam Pacific”) | | 50.93 | % | | 50.93 | % |
| Double D Cable Company Limited (“Double D”) | | 50.93 | % | | 50.93 | % |
| Hard Lek Limited. | | 73.98 | % | | 73.98 | % |
| APWC (Thailand) Co., Ltd. | | 99.48 | % | | 99.48 | % |
| PEWC (Thailand) Co., Ltd. | | 99.48 | % | | 99.48 | % |
| CTW Beta Co., Ltd. | | 50.89 | % | | 50.89 | % |
| Siam Fiber Optics Co., Ltd. (“SFO”) (ii) | | 50.93 | % | | 50.93 | % |
| Taiwan | | | | |
| Asia Pacific New Energy Corporation Limited ("APNEC") (iii) | | 100.00 | % | | 100.00 | % |
Pacific Smart System Corporation Limited ("PSSC") (iii)
(Formerly YASHIN Energy Corporation Limited) | | 100.00 | % | | 100.00 | % |
| YADING Energy Corporation Limited ("YADING") | | 100.00 | % | | 100.00 | % |
| (i)
| Charoong Thai is listed on the Stock Exchange of Thailand and is engaged in the manufacturing of wire and cable products for the power and telecommunications industries in Thailand.
|
(i)Charoong Thai is listed on the Stock Exchange of Thailand and is engaged in the manufacturing of wire and cable products for the power and telecommunications industries in Thailand. | (ii)
| The directors have concluded that the Company controls SFO, even though it holds less than half of the voting rights of this subsidiary. This is because the Company is the largest shareholder with a 50.93% equity interest in Charoong Thai, which held a 90% and 60% equity interest of SFO as of December 31. 2019 and 2018, respectively.
|
(ii)APWC holds 50.93% of the interests of Charoong Thai. Until June 30, 2021, Charoong Thai held 90% of the interests in SFO, giving APWC control over 45.84% of the voting power of SFO. On OctoberJune 30, 2019,2021, Charoong Thai acquired additional 30%the other 10% interest in SFO for(for a total consideration of THB 9 million, thereby7.5 million), increasing the Company’s interestits interests in SFO to 100% and APWC’s control of the voting power of SFO from 30.56%45.84% to 45.84%50.93%. TheOur Company recorded the effect of change in shareholding of the subsidiaries, amounting to $40$167 under the caption of “Additional paid-in capital” in the consolidated statement of change in equity.
| (iii)
| On June 19, 2018, APWC’s Board of Directors approved to set up APNEC as the Company’s subsidiary with 100% held. APNEC registered its incorporation on October 26, 2018 with TWD 500 million registered capital and a paid-up capital of TWD 4 million.
|
In December 2018, APNEC acquired 100%
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. BASIS OF PREPARATION (continued)
2.2 Basis of consolidation (continued)
(iii)On December 15, 2022, APWC contributed additional capital in APNEC in the form of a cash injection of $3.9 million (or NT$120 million). Following that, on December 16, 2022, APNEC increased the capital of its subsidiary PSSC by injecting US$2.3 million (or NT$70 million) in cash.
3.
SUMMARY OF SIGNIFICANTSIGNIFICANT ACCOUNTING POLICIESThe
Our Company has consistently applied the following accounting policies to all periods presented in these consolidated financial statements, except as mentioned otherwise (see also Note 4.1).
| 3.1
| 3.1 Current versus non-current classification |
The
Our Company presents assets and liabilities in the balance sheets based on current and non-current classification. An asset is current when it is:
Expected to be realized or intended to be sold or consumed in the normal operating cycle;
| ►
| Held primarily for the purpose of trading;
|
| ►
| Expected to be realized within twelve months after the reporting period; or
|
uHeld primarily for the purpose of trading; | ►
| Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
|
uExpected to be realized within twelve months after the reporting period; oruCash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period.
All other assets are classified as non-current.
A liability is current when:
It is expected to be settled in a normal operating cycle;
| ►
| It is held primarily for the purpose of trading;
|
| ►
| It is due to be settled within twelve months after the reporting period; or
|
uIt is held primarily for the purpose of trading; | ►
| There is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
|
uIt is due to be settled within twelve months after the reporting period; orThe
uThere is no unconditional right to defer the settlement of the liability for at least twelve months after the reporting period.
Our Company classifies all other liabilities as non-current.
Deferred tax assets and liabilities are classified as non-current assets and liabilities.
The operating profit is the profit earned from core business operations, and it does not include any profit earned from investment and the effects of interest and taxes.
| 3.3
| 3.3 Fair value measurement |
The
Our Company measures financial instruments at fair value at each balance sheet date. In addition, fair values of financial instruments measured at amortized cost are disclosed in Note 11(d).
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.3 Fair value measurement (continued)
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
| ►
| In the principal market for the asset or liability, or
|
| ►
| In the absence of a principal market, in the most advantageous market for the asset or liability.
|
uIn the principal market for the asset or liability, oruIn the absence of a principal market, in the most advantageous market for the asset or liability.
The principal or the most advantageous market must be accessible to by
theour Company.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.
F-12
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.3
| Fair value measurement (continued)
|
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The
Our Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
| ►
| Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
|
| ►
| Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectly
|
uLevel 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities | ►
| Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
|
uLevel 2 — Inputs other than quoted prices included within Level 1 that are observable for the assets or liability, either directly or indirectlyuLevel 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the financial statements on a recurring basis,
theour Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
For the purpose of fair value disclosures, theour Company has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy as explained above.
| 3.4
| 3.4 Cash and cash equivalents |
Cash and cash equivalents in the consolidated balance sheet comprise of cash at banks and highly liquid investments with purchased maturities of three months or less, which are subject to an insignificant risk of change in value.
For the purpose of the consolidated statements of cash flows, cash and cash equivalents are net of outstanding bank overdrafts as they are considered an integral part of
theour Company’s cash management.
The balance
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.5 Inventories
Inventories are stated at the lower of cost and net realizable value. Cost of manufactured goods is determined on the weighted average basis and, in the case of work in progress and finished goods, comprises direct materials, direct labor and an appropriate proportion of overheads based on the normal operating capacity. Cost of distributed goods is determined on the weighted average basis. Net realizable value is based on estimated selling prices less any estimated costs to be incurred to completion and the estimated cost necessary to make the sale.
F-13
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.6
| 3.6 Property, plant and equipment |
Property, plant and equipment is stated at cost, net of accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.
Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalized in the carrying amount of the asset as a replacement. When significant parts of property, plant and equipment are required to be replaced at intervals,
theour Company recognizes such parts as individual assets with specific useful lives and depreciates them accordingly.
Spare parts and servicing equipment are usually carried as inventory and recognized in profit or loss as consumed. However, major spare parts and stand-by equipment qualify as property, plant and equipment when an entity expects to use them for more than one year.
The present value of the expected cost for the decommissioning of an asset after its use is included in the cost of the respective asset if the recognition criteria for a provision are met. A provision shall be recognized when:
| (a)
| an entity has a present obligation (legal or constructive) as a result of a past event;
|
| (b)
| it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
|
(a)an entity has a present obligation (legal or constructive) as a result of a past event; | (c)
| a reliable estimate can be made of the amount of the obligation.
|
(b)it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and(c)a reliable estimate can be made of the amount of the obligation.
If these conditions are not met, no provision shall be recognized.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
► Buildings
| 20-30 years
| | | | |
► Buildings | 15-30 years |
| ► Building improvement | 3-202-20 years
|
► Machinery and equipment | 4-20 years |
► Motor vehicles | 3-10 years |
► Office equipment | 2-203-20 years
|
An item of property, plant and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognized.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.6 Property, plant and equipment (continued)
The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate.
F-14
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.6
| Property, plant and equipment (continued)
|
ImpairmentImpairment
If circumstances arise which indicate assets might be impaired, a review should be undertaken of their cash generating abilities through either use or sales. This review will produce an amount, which should be compared with the asset’s carrying value, and if the carrying value is higher, the difference must be written off as an impairment adjustment in the income statement. Further detailed methodology used for an impairment test is given in Note 3.11 - Impairment of non-financial assets.
From January 1, 2019
The
Our Company assesses at contract inception whether a contract is, or contains, a lease. That is,
theour Company assesses whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The
Our Company as a lessee
The
Our Company, as a lessee, applies a single accounting model to recognize assets and liabilities for all leases, except for the lease term is 12 months or less or the underlying asset has a low value.
TheOur Company recognizes lease liabilities to make lease payment and right-of-use assets representing the right to use the underlying assets.
(i)Right-of-use assetsThe
Our Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payment made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:
| | | | | |
►Land use right | 2 to 37 years |
►Buildings | 2 to 3 years |
►Motor vehicles | 12 to 3 years
|
►Office equipment | 3 to 5 years |
If the ownership of the leased asset transfers to
theour Company at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment. Refer to the accounting policies Note 3.11 impairment of non-financial assets.
F-15
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.7
| Leases3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
3.7 Leases (continued)
At the commencement date of the lease,
theour Company recognizes lease liabilities measured at the present value of lease payment to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by
theour Company and payments of penalties for terminating the lease, if the lease term reflects
theour Company exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognized as expenses in the period in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments,
theour Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g. changes to future payments resulting from a change in an index or rate used to determine such lease payment) or a change in the assessment of an option to purchase the underlying asset.
(iii)Short-term leases and leases of low-value assetsThe
Our Company applies the short-term lease recognition exemption to its short-term leases. It also applies the lease of low-value assets recognition exemption to its leases that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognized as expense on a straight-line basis over the lease term.
The
Leases for which
theour Company is a lessor are classified each of its leases as either an operating lease or finance lease.
Whenever the terms of the lease transfer substantially all the risks and rewards incidental to ownership of an underlying asset, the lease is classified as a finance lease. Amount due from lessees under finance lease are recognized as receivables at the amount of
theour Company’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on
theour Company’s net investment outstanding in respect of the leases.
Leases in which
theour Company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the consolidated income statements due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized over the lease term on the same basis as rental income. Contingent rents are recognized as revenue in the period in which they are earned.
Property (land and/or a building, or part of a building) subject to an operating lease shall be recognized as an investment
property.F-16
property if, and only if, the property would otherwise meet the definition of an investment property and the lessee uses the fair value model for the asset recognized.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.7
| Leases3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Prior to January 1, 2019
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date. The arrangement is assessed for whether fulfillment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset or assets, even if that right is not explicitly specified in an arrangement.
Finance leases
Finance leases that transfer substantially all the risks and benefits incidental to ownership of the leased item to the Company, are capitalized at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognized in finance
3.8 Borrowing costs
in the income statement.A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating leases
Operating lease payments are recognized as an operating expense in the income statement on a straight-line basis over the lease term.
Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognized on the straight-line basis over the lease terms. The prepaid land lease payments are presented as current or non-current assets on the face of balance sheet, depending on the amount to be recognized less or more than twelve months after the reporting period.
Borrowing costs are required to be capitalized as part of the cost of the asset if they are directly attributable to the acquisition, construction or productions of a qualifying asset (whether or not the funds have been borrowed specifically). All other borrowing costs are recognized as an expense in the period in which they are incurred.
A qualifying asset is an asset that necessarily takes a substantial period to get ready for its intended use or sale.
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
F-17
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.8
| Borrowing costs (continued)
|
Borrowing costs include:
| ►
| interest expense calculated using the effective interest method;
|
| ►
| finance charges in respect of finance leases; and
|
uinterest expense calculated using the effective interest method; | ►
| exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Exchange differences are generally regarded as borrowing costs only to the extent that the combined borrowing costs, including exchange differences, approximate the amount of borrowing costs on functional currency equivalent borrowings.
|
ufinance charges in respect of lease liabilities; anduexchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. Exchange differences are generally regarded as borrowing costs only to the extent that the combined borrowing costs, including exchange differences, approximate the amount of borrowing costs on functional currency equivalent borrowings.
For specific borrowings, the borrowing costs eligible for capitalization are the actual borrowing costs incurred related to funds that are borrowed specifically to obtain a qualifying asset less any investment income earned on the temporary investment of those borrowings.
For general borrowings, the capitalization rate applied to borrowing costs on the consolidation level will be based on cash management strategy, which might be the weighted average of the group borrowings outstanding during the period.
| 3.9
| 3.9 Investment properties |
Investment properties are properties held to earn rentals and/or for capital appreciation (including property under construction for such purposes). Investment properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are carried at historical cost less provisions for depreciation and impairment. Additional costs incurred subsequent to the acquisition of an asset increase the carrying amount of the asset or recognized as a separate asset if it is probable that future economic benefits associated with the assets will flow into
theour Company and the cost of an asset can be measured reliably. Routine maintenance and repairs are expensed as incurred. While land is not depreciated, all other investment property is depreciated based on the respective assets estimated useful lives ranging from 20 to
3040 years using the straight-line method.
The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. An investment property is derecognized upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from the disposal. Any gain or loss arising on derecognition of the property (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in income or loss in the period in which the property is derecognized.
International Accounting Standards (“IAS”) 40 requires disclosures about the fair value of any investment property recorded at cost. See Note 17 – Investment Properties.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments
|
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)3.10 Financial instruments A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Classification and measurement
Except for certain trade receivables,
the companyour Company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs directly attributable to the acquisition or issue of the financial asset. Financial instruments are subsequently measured at amortized cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVPL). The classification is based on two criteria: the objective of
the company’sour Company’s business model for managing the assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal amount outstanding (the ‘SPPI criterion’).
The classification and measurement of financial assets is as follows:
| ►
| Debt instruments at amortized cost
|
uDebt instruments at amortized costFinancial assets meeting both conditions: (i) held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and (ii) the contractual terms of the financial assets give arise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding, are measured subsequent to initial recognition at amortized cost. The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest rate (“EIR”) method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. Interest income, foreign exchange gains and losses, and any impairment charges for such instruments are recognized in profit or loss.
The
Our Company’s financial assets at amortized costs include cash and cash equivalents, trade receivables, other receivable, and the receivable from related party.
| ►
| Debt instruments at FVOCI with gains or losses recycled to profit or loss on derecognition
|
uDebt instruments at FVOCI with gains or losses recycled to profit or loss on derecognitionFinancial assets that are held within a business model whose objective is to hold financial assets in order to both collecting contractual cash flows and selling financial assets, and that the contractual terms of the financial assets give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Interest income, foreign exchange gains and losses, and any impairment charges on such instruments are recognized in profit or loss. All other fair value gains and losses are recognized in OCI. On disposal of these debt instruments, any related balance with FVOCI reserve is reclassified to profit or loss.
F-19
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
uEquity instruments designated at FVOCI with no recycling of gains or losses on derecognition(i) Financial assets (continued)
| ►
| Equity instruments designated at FVOCI with no recycling of gains or losses on derecognition
|
These instruments are undertakings in which theour Company does not have significant influence or control, generally evidenced by ownership of less than 20% of the voting rights. TheOur Company designates these investments on an instrument by instrument basis as equity securities at FVOCI because they represent investments held for long term strategic purposes.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.10 Financial instruments (continued)
(i)Financial assets (continued)
Investments in equity instruments at FVOCI are initially measured at fair value plus transaction costs. Subsequently, they are measured at fair value with gains and losses arising from changes in fair value recognized in OCI. These investments are not subject to impairment testing and upon disposal, the cumulative gain or loss in OCI is not reclassified to profit or loss on disposal. Dividends from such investments continue to be recognized in profit or loss when
theour Company’s right to receive payments is established.
The
Our Company elected to classify irrevocably its non-listed equity investments under this category.
| ►
| Financial assets at fair value through profit or loss (FVPL)
|
uFinancial assets at fair value through profit or loss (FVPL)Assets that do not meet the criteria for amortized cost or FVOCI are measured at FVPL. A gain or loss on a debt instrument that is subsequently measured at FVPL is recognized in profit or loss in the period in which it arises.
Even if an instrument meets the two requirements to be measured at amortized cost or FVOCI,
theour Company may, at initial recognition, irrevocably designate a financial asset as measured at FVPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency.
Changes in the fair value of financial assets at FVPL are recognized in the statement of profit or loss as applicable.
When, and only,
theour Company changes its business model for managing financial assets it shall reclassify all affected financial assets according to the classification and measurement criteria discussed earlier. If
theour Company reclassifies financial assets, it shall apply the reclassification prospectively from the reclassification date and shall not restate any previously recognized gains, losses (including impairment gains or losses) or interest.
F-20
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
Derecognition(i) Financial assets (continued)
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognized (i.e. removed from
theour Company’s consolidated balance sheet) when and only when:
(a) the rights to receive cash flows from the asset have expired, or
(b)
theour Company has transferred its rights to receive cash flows from the asset, or has assumed an obligation to pay the received cash flows in full without material delay to one or more recipients under a “pass-through” arrangement; and either (i)
theour Company has transferred substantially all the risks and rewards of the asset, or (ii)
theour Company has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.
When
theour Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates the extent to which, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset and has not transferred the control of the assets,
theour Company continues to recognize the transferred asset to the extent of its continuing involvement. In that case,
theour Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that
theour Company has retained.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.10 Financial instruments (continued)
(i)Financial assets (continued)
Derecognition(continued)
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that
theour Company could be required to repay (“the guarantee amount”).
(ii)Financial liabilities Classification and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognized initially at fair value and, net of directly attributable transaction costs in the case of loans and borrowings.
The
Our Company’s financial liabilities include trade and other payables, bank overdrafts and
interest-beinginterest-bearing loans and borrowings. These financial liabilities represent liabilities for goods and services provided to
theour Company and refund liabilities arising from contracts with customers. Trade payable are non-interest bearing and are normally settled on 60-day terms. The refund liabilities are rebate and discounts for the sale of goods to external customers in the ordinary course of
theour Company’s activities. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognized initially at fair value and subsequently measured at amortized cost using the EIR method.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.
F-21
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
(ii) Financial liabilities (continued)
Classification and measurement (continued)
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the income statement.
A financial liability is derecognized when the obligation under the liability is discharged, cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the income statement.
(iii)Foreign currency forward contracts Non-hedging derivatives are initially recognized at fair value on the date a derivative contract is entered into and recorded as financial assets or financial liabilities at fair value through profit or loss. They are subsequently re-measured at fair value, and the gains or losses are recognized in profit or loss.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.10 Financial instruments (continued)
(iv)Impairment of financial instruments The following financial instruments are included within the scope of the impairment requirements in IFRS 9 Financial Instruments:
(a)Financial assets measured at amortized cost; (b)Financial assets mandatorily measured at FVOCI; (c)Loan commitments when there is a present obligation to extend credit (except where these are measured at FVPL);
(d)Financial guarantee contracts to which IFRS 9 is applied (except those measured at FVPL); (e)Lease receivables within the scope of IFRS 16 Leases from January 1, 2019 and IAS 17 prior toJanuary 1, 2019.
Leases.
(f)Contract assets within the scope of IFRS 15 Revenue from Contracts with Customers.From January 1, 2018, the
Our Company assesses on a forward looking basis the expected credit losses (ECLs) associated with its debt instruments carried at amortized cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.
With the exception of purchased or originated credit impaired financial assets, ECLs are required to be measured through a loss allowance at an amount equal to:
(a)credit risk has not increased significantly since initial recognition – recognize 12-month ECLs , and recognize interest on a gross basis; or (b)credit risk has increased significantly since initial recognition – recognize lifetime ECL, and recognize interest on a gross basis. Our Company assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days past due.
A loss allowance for full lifetime ECLs is required for contract assets or trade receivables that do not constitute a financing transaction in accordance with IFRS 15.
TheOur Company may select its accounting policy for contract assets and trade receivables, containing a significant financing component and lease receivables to measure the loss allowance at an amount equal to lifetime ECLs.
F-22
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
For trade receivables and contract assets, theour Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables, see Note 12(c) for further details.
The
Our Company recognizes in profit or loss, the amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized.
(v)Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if when the following conditions are met: (i) there is a currently enforceable legal right to offset the recognized amounts; and (ii) there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.10 Financial instruments (continued)
(vi)Fair value of financial instruments The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:
| ►
| Recent arm’s length market transactions
|
| ►
| Current fair value of another instrument that is substantially the same
|
uRecent arm’s length market transactions | ►
| A discounted cash flow analysis or other valuation models
|
F-23
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term.
Financial assets at fair value through profit or loss are carried in the balance sheet at fair value with net changes in fair value presented as net loss on financial instruments (negative net changes in fair value) or net gain on financial instruments (positive net changes in fair value) in the income statement.
Derivatives not designated as hedging instruments
A derivative is a financial instrument or other contract within the scope of IAS 39 with all of the following characteristics:
| (a)
| its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable, provided in the case of a non-financial variable that the variable is not specific to a party to the contract (sometimes called the ‘underlying’);
|
| (b)
| it requires no initial net investment, or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors; and
|
| (c)
| it is settled at a future date.
|
Fair value is the measurement basis for all financial instruments meeting the definition of a derivative. Change inuCurrent fair value of non-hedged itemanother instrument that is recorded in profit and loss.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortized cost usingsubstantially the effective interest rate (“EIR”) method, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included in finance income in the income statement. The losses arising from impairment are recognized in the other operating expenses for receivables.
Held-to-maturity investments
Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held to maturity when the Company has the positive intention and ability to hold them to maturity. After initial measurement, held to maturity investments are measured at amortized cost using the EIR, less impairment. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance income or finance cost in the income statement. The losses arising from impairment are recognized in the income statement as finance costs.
F-24
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
same | 3.10
| Financial instruments (continued)
|
Available-for-sale financial assets
Available-for-sale financial assets include equity investments and debt securities. Equity investments classified as available for sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those that are intended to be held for an indefinite period of time and that may be sold in response to needs for liquidity or in response to changes in the market conditions.
After initial measurement, available-for-sale financial assets are subsequently measured at fair value with unrealized gains or losses recognized as other comprehensive income in the available-for-sale reserve until the investment is derecognized, at which time the cumulative gain or loss is recognized in other income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for-sale reserve to the income statement in finance costs. Interest earned whilst holding available-for-sale financial investments is reported as finance income using the EIR method.
For a financial asset reclassified out of the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortized cost and any previous gain or loss on the asset that has been recognized in equity is amortized to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortized cost and the maturity amount is also amortized over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is recognized in the income statement.
Derecognition
uA financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:
| ►
| The rights to receive cash flows from the asset have expired, or
|
| ►
| The Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
|
When the Company has transferred its rights to receivediscounted cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognizes an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained.
F-25
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
| (ii)
| Impairment of financial assets
|
The Company assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if there is objective evidence of impairment as a result of one or more events that has occurred since the initial recognition of the asset (an incurred ‘loss event’) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcyflow analysis or other financial reorganization and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Financialvaluation models
3.11 Impairment of non-financial assets
carried at amortized costFor financial assets carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.
The carrying amount of the asset is reduced through the use of an allowance account, and the loss is recognized in profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as finance income in the income statement. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realized or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to finance costs in the income statement.
F-26
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
Trade receivables impairment
For trade receivables, impairment assessment is performed firstly on an individual basis:
A financial asset is impaired (and impairment losses are determined) if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after initial recognition (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.
Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to the attention of the holder about the following loss events:
| ►
| significant financial difficulty of the issuer or obligor;
|
| ►
| breach of contract, such as a default or delinquency in interest or principal payments;
|
| ►
| the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that would not otherwise be considered;
|
| ►
| it becoming probable that the borrower will enter bankruptcy or other financial reorganization;
|
| ►
| the disappearance of an active market for that asset because of financial difficulties (but not simply because the asset is no longer publicly traded ; or
|
| ►
| observable data indicating that there is a measurable decrease in the estimated future cash flows from a Company of financial assets since initial recognition, although the decrease cannot yet be identified with the individual assets in the Company, including:
|
adverse changes in the payment status of borrowers in the Company (e.g. an increased number of delayed payments); or
national or local economic conditions that correlate with defaults on the assets in the Company.
For trade receivables that have been individually assessed, but for which there is no objective evidence of impairment, the review for impairment is performed on a group basis, based on similar credit risk characteristics.
Available-for-sale financial assets
For available-for-sale financial assets, the Company assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.
In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost. The Company’s policy considers a significant decline to be one in which the fair value is below the weighted average original cost by more than 20%. A prolonged decline is considered to be one in which the fair value is below the weighted average original cost for a period of more than 12 months. When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement – is removed from other comprehensive income and recognized in the income statement. Impairment losses on equity investments are not reversed through profit or loss; increases in their fair value after impairment are recognized directly in other comprehensive income.
F-27
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
Available-for-sale financial assets(continued)
In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as financial assets carried at amortized cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortized cost and the current fair value, less any impairment loss on that investment previously recognized in the income statement.
Future interest income continues to be accrued based on the reduced carrying amount of the asset, using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognized in the income statement, the impairment loss is reversed through the income statement.
| (iii)
| Financial liabilities
|
Financial liabilities initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition.
All financial liabilities are recognized initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.
The Company’s financial liabilities include trade and other payables, bank overdrafts and interest-bearing loans and borrowings.
Subsequent measurement
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortized cost using the EIR method. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process.
Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the income statement.
Derecognition
A financial liability is derecognized when the obligation under the liability is discharged or cancelled, or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognized in the income statement.
| (iv)
| Offsetting of financial instruments
|
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated balance sheet if there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, to realize the assets and settle the liabilities simultaneously.
F-28
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.10
| Financial instruments (continued)
|
| (v)
| Fair value of financial instruments
|
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs.
For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:
| ►
| Using recent arm’s length market transactions
|
| ►
| Reference to the current fair value of another instrument that is substantially the same
|
| ►
| A discounted cash flow analysis or other valuation models
|
| 3.11
| Impairment of non-financial assets
|
TheOur Company assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, theour Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (“CGU”) fair value less costs to sell and its value in use. A CGU is the smallest group of assets that generates cash inflows that are largely independent of the cash flows from other assets or groups of assets. Recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Company of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.
The
Our Company bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of
theour Company’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognized in the income statement in expense categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognized impairment losses no longer exist or have decreased. If such indication exists,
theour Company estimates the asset’s or CGU’s recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the consolidated income statement.
F-29
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.12 Intangible assets
The costs of acquiring software is capitalized separately as an intangible asset on the basis of the costs incurred to acquire and bring to use the specific software. Acquired software (licenses) is stated at cost less accumulated amortization and impairment losses.
Amortization of software applications is charged to operating expenses and/or cost on a straight-line basis over 2 to 10 years from the date they are available for use.
The residual values and useful lives are reviewed at each balance sheet date and adjusted, if appropriate.
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where
theour Company operates.
Current income tax relating to items recognized directly in equity is recognized in equity and not in the income statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax liabilities are recognized for all taxable temporary differences, except:
| ►
| When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
|
| ►
| In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
|
uWhen the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; oruIn respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax assets are recognized for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilized, except:
| ►
| When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
|
uWhen the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 3.13 Taxes (continued)
Deferred tax (continued)
| ►
| In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.
|
uIn respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Unrecognized deferred tax assets are reassessed at each reporting date and are recognized to the extent that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.
The tax expense for the period comprises current and deferred tax. Tax is recognized in profit or loss, except to the extent that it relates to items recognized in other comprehensive income or items recognized directly in equity, in which cases the tax is recognized in other comprehensive income or equity. Deferred tax relating to items recognized outside profit or loss is recognized outside profit or loss.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
An entity’s tax position might be uncertain; for example, where the tax treatment of an item of expense or structured transaction may be challenged by the tax authorities.
The
Our Company considers each uncertain tax positions individually, by first considering whether each position taken in the tax return is probable of being sustained on examination by the taxing authority, and recognizing a liability for each item that is not probable of being sustained. The liability then is measured using a single best estimate of the most likely outcome. The uncertain tax positions are presented in the current tax liabilities.
The Company recognizes interest expense and penalties related to income tax matters as a component of income tax expense.
F-31
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.14
| 3.14 Revenue recognition |
The
Our Company generates revenue primarily from the sales of wires and cables and supply, delivery and installation services to its customers (see Note 5(e)).
Revenue from
contractcontracts with customers is recognized when (or as) control of the goods or services (i.e. assets) are transferred to the customer at an amount that reflects the consideration to which
theour Company expects to be entitled in exchange for those goods or services.
TheOur Company has concluded that it is the principal in its revenue arrangements because it controls the goods or services before transferring them to the customer.
TheOur Company has certain contracts with customers to perform fabrication services for its customers, converting customer-owned raw materials to wire and cable products.
TheOur Company is responsible for fulfilling the promise to provide the specified services.
Revenue is recognized as control is passed, either over time or at a point in time.
The
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.14 Revenue recognition (continued)
Our Company recognizes revenue over time if one of the following criteria is met:
(a)the customer simultaneously receives and consumes the benefits provided by theour Company’s performance as the entity performs; (b) theour Company’s performance creates or enhances an asset (for example, work in progress) that the customer controls as the asset is created or enhanced; or (c) theour Company’s performance does not create an asset with an alternative use to theour Company and theour Company has an enforceable right to payment for performance completed to date. If
theour Company does not satisfy its performance obligation over time, it satisfies it at a point in time. Revenue will therefore be recognized when control is passed at a certain point in time. Factors that may indicate the point in time at which control passes include, but are not limited to:
(a)the entity has a present right to payment for the asset; (b)the customer has legal title to the asset; (c)the entity has transferred physical possession of the asset; (d)the customer has the significant risks and rewards of ownership of the asset; or (e)the customer has accepted the asset. When (or as) a performance obligation is satisfied,
theour Company recognizes as revenue the amount of the transaction price that is allocated to that performance obligation.
While deferred payment terms may be agreed in certain circumstances, the deferral never exceeds twelve months.
TheOur Company applies the practical expedient not to adjust the promised amount of consideration for the effects of a significant financing component if
theour Company expects, at contract inception, that the period between when
theour Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
F-32
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.14
| Revenue recognition (continued)
|
Sales of wires and cables
Revenue from sales of wires and cables is recognized at the point in time when control of the asset is transferred to the customer, generally on delivery of the wires and cables.
If the consideration in a contract includes a variable amount,
theour Company estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at a contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognized will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
The amount of consideration can vary because of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties or other similar items. The promised consideration can also vary if a Company’s entitlement to the consideration is contingent on the occurrence or non-occurrence of a future event.
The
Our Company estimates an amount of variable consideration by using either of (a) the expected value, or (b) the most likely amount, depending on which
theour Company expects to better predict the amount of consideration to which it will be entitled.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.14 Revenue recognition (continued)
At the end of each reporting period,
theour Company updates the estimated transaction price (including updating its assessment of whether an estimate of variable consideration is constrained) to represent faithfully the circumstances present at the end of the reporting period and the changes in circumstances during the reporting period.
TheOur Company allocates any subsequent changes in the transaction price to the performance obligations on the same basis as at contract inception.
Our Company’s supply, delivery and installation services are closely interrelated in terms of their ultimate purpose or use and the customer is able to specify the major structural elements of the design. Revenue from SDI is recognized when
theour Company satisfies performance obligations which occurs when the control of either goods or services are transferred to the customer. Transfer of control to a customer can occur either over a period of time or at a single point in time, and the transfer of controls depends on the scope of service work orders.
Service work order that involves supply of cables, installation and/or labor (e.g. maintenance or repairing service) are not distinct and are identified to be one performance obligation satisfied over time since the elements of the service work order are highly interrelated, customized and modified for the customer.
TheOur Company selects an input method (cost-to-cost) to measure the progress toward satisfaction of the performance obligation.
TheOur Company’s estimate about revenue, costs and progress towards complete satisfaction of a performance obligation may revise when there is a change in circumstances. Any increase or decrease in revenue or costs due to an estimate revision is reflected in profit or loss during the period when the management become aware of the changes in circumstances.
F-33
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.14
| Revenue recognition (continued)
|
Custodial and transportation services under bill and hold arrangement
A bill and hold arrangement is a contract under which an entity bills a customer for a product but the entity retains physical possession of the product until it is transferred to the customer at a point in time in the future.
TheOur Company identifies multiple performance obligations for its bill and hold arrangements, including sales of wires and cables, custodial service and transportation service.
Sales of wires and cables are recognized
as revenue when the products are placed into warehouse and the customer has accepted the products because the control of the products has transferred to the customer.
Custodial service revenue and transportation service are recognized over time. The transaction price allocated to these services is recognized as a contract liability at the time of the initial sales transaction and released on actual basis over the period of services.
Onerous operating contracts
Onerous contract is a type of contract in which the costs of meeting the obligations under the contract are higher than the economic benefits received under the contract.
The cost of fulfilling a contract comprises the costs that related directly to the contract.
Our Company has contracts to supply products that may become onerous due to changing circumstances.
TheOur Company establishes the unavoidable costs of meeting the obligations under the contract as an accrued liability for the contractual responsibilities. For example, when rising copper price renders a contract onerous, the liability is calculated based on the difference between the
lock-in purchase copper price, or the copper price on the London Metal Exchange (the “LME”)
at reporting date and the prices determined in the contracts, if the difference exceeds the profit of the original contract. The unavoidable costs exceeding the profit of the contract is recognized in cost of sales or other operating expense based on the nature of the unavoidable costs.
Prior to January 1, 2018
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured, regardless
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.14
| Revenue recognition3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
SDI
The Company’s supply, delivery and installation services are closely interrelated in terms of their ultimate purpose or use and the customer is able to specify the major structural elements of the design. Revenue of SDI is accounted for using the percentage-of-completion method, based on the customer certification of the length of cables laid with respect to the estimated total length of cables under the contract in accordance with IAS 11.
When the current estimates of total contract revenue and contract cost indicate a loss, a provision for the entire loss on the contract is made. Provision for losses is recognized in the period in which they become evident. On a quarterly basis, the Company reviews the budget and forecast whether a loss provision should be recorded.
Bill and hold transaction
The Company recognizes revenue from sales of goods under bill and hold arrangements when they have yet to be delivered, since delivery is delayed at the buyer’s request and the buyer takes title and accepts the billing and that the usual terms of payment apply.
Moreover, the inventory is on hand, clearly identified and ready for delivery to the buyer at the time the revenue is recognized and it is highly probable that delivery will be made.
Sales of goods under bill and hold arrangements are the invoiced value, excluding value added tax after deducting discounts and allowances.
Rebates
Based on IAS 18, the amount of revenue arising on a transaction is usually determined by agreement between the entity and the buyer or user of the asset. It is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by the entity. Consequently, where an entity provides sales incentives to a customer when entering into a contract these are usually treated as rebates and will be included in the measurement of (i.e. deducted from) revenue when the goods are delivered or services provided.
Provisions for rebates based on attainment of sales targets are estimated and accrued as each of the underlying sales transactions is recognized.
Provision for rebate should only be recorded when there is a contractually formal signed rebate contract exists.
At interim dates, if no reliable estimate can be made, the revenue recognized on the transaction should not exceed the consideration that would be received if the maximum rebates were taken. Therefore, the Company assumes that the customers will achieve the necessary sales volume target to earn the maximum rebate. The provisions are subject to continuous review and adjustment as appropriate based on the most recent information available to management.
As of the balance sheet date, the Company recalculates and adjusts the provision for rebate based on the actual sales.
F-35
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.15
| 3.15 Foreign currencies |
The
Our Company’s consolidated financial statements are presented in USD, which is also the parent company’s functional currency. For each entity
theour Company determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by
theour Company’s entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognized in profit or loss with the exception of monetary items that are designated as part of the hedge of
theour Company’s net investment of a foreign operation. These are recognized in other comprehensive income until the net investment is disposed of, at which time, the cumulative amount is reclassified to profit or loss. Tax charges and credits attributable to exchange differences on those monetary items are also recorded in other comprehensive income.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair value is treated in line with the recognition of gain or loss on change in fair value of the item (i.e., translation differences on items whose fair value gain or loss is recognized in other comprehensive income or profit or loss are also recognized in other comprehensive income or profit or loss, respectively).
Translation to the presentation currency
The results and financial position of an entity whose functional currency are translated into a different presentation currency using the following procedures:
| a.
| assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
|
| b.
| income and expenses for each statement presenting profit or loss and other comprehensive income (i.e. including comparatives) are translated at exchange rates at the dates of the transactions;
|
a.assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; | c.
| all resulting exchange differences shall be recognized in other comprehensive income; and
|
b.income and expenses for each statement presenting profit or loss and other comprehensive income (i.e. including comparatives) are translated at exchange rates at the dates of the transactions; | d.
| c.all resulting exchange differences shall be recognized in other comprehensive income; and d.for equity items, the historical rate is used; therefore, these equity items are not retranslated. |
PEWSC functional currency change
Due to the increased sales to the domestic market in recent years, USD no longer faithfully represented the underlying transactions events and conditions of PEWSC in 2018. Management concluded that RMB should be the functional currency of PEWSC beginning on the financial year January 1, 2018.
F-36
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
historical rate is used; therefore, these equity items are not retranslated. | 3.16
| 3.16 Employee benefits |
The
Our Company has both defined contribution and defined benefit obligation. The liabilities of
theour Company arising from defined benefit obligations, and the related current service cost, are determined using the projected unit credit method.
For defined benefit plans, the cost charged to the income statement consists of current service cost, net interest cost and past service cost. Remeasurements comprising of actuarial gains and losses are recognized in the period in which they occur, directly in other comprehensive income. They are included in other comprehensive income in the statement of changes in equity and in balance sheet. Remeasurements are not reclassified to profit or loss in subsequent periods. Contributions to defined contribution plans are charged to the income statement as incurred. All past service costs are recognized at the earlier of when the amendment occurs.
Past service cost is the term used to describe the change in a defined benefit obligation for employee
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.16 Employee benefits (continued)
service in prior periods, arising as a result of changes to plan arrangements in the current period (i.e. plan amendments introducing or changing benefits payable, or curtailments which significantly reduce the number of covered employees). Past service costs may be either positive or negative. Gains or losses on the settlement of a defined benefit plan are recognized when the settlement occurs. Before past service costs are determined, or a gain or loss on settlement is recognized, the net defined benefit liability or asset is required to be remeasured.
The cost of accumulating paid absences is recognized when employees render the service that increases their entitlement to future paid absences.
The cost of accumulating paid absences is measured as the additional amount that the entity expects to pay as a result of the unused entitlement that has accumulated at the end of the reporting period.
| 3.17
| 3.17 Earnings per share |
The
Our Company presents basic and diluted earnings per share (“EPS”) data for its common shares. Basic EPS is calculated by dividing the net income attributable to shareholders of
theour Company by the weighted average number of common shares outstanding during the period, adjusted for own shares held.
In calculating diluted EPS, the number of shares should be that used in calculating the basic EPS, plus the weighted average number of shares that would be issued on the conversion of all the dilutive potential common shares into common shares. The earnings figure should be that used for basic EPS adjusted to reflect any post-tax effects from changes that would arise if the potential shares outstanding in the period were actually issued.
F-37
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
Own equity instruments that are reacquired (treasury shares) are recognized at cost and deducted from equity. No gain or loss is recognized in the profit or loss on the purchase, sale, issue or cancellation of theour Company’s own equity instruments. Any difference between the carrying amount and the consideration, if reissued, is recognized in additional paid-in capital. Voting rights related to treasury shares are nullified and no dividends are allocated to them.
| 3.19
| 3.19 Investments in an associate |
The
Our Company’s investment in its associates are accounted for using the equity method. An associate is an entity in which
theour Company has significant influence. Under the equity method, the investment is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in
theour Company’s share of net assets of the associate since the acquisition date. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortized nor individually tested for impairment.
The income statement reflects
theour Company’s share of the results of operations of the associate. Any change in other comprehensive income of those investees is presented as part of
theour Company’s other comprehensive income. When there has been a change recognized directly in the equity of the associate,
theour Company recognizes its share of any changes, when applicable, in the statement of changes in equity. Unrealized gains and losses resulting from transactions between
theour Company and the associate are eliminated to the extent of the interest in the associate.
The
Our Company’s share of profit or loss of an associate is shown on the face of the income statement and represents profits or loss after tax and non-controlling interests in the subsidiaries of the associate.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.19 Investments in an associate (continued)
The financial statements of the associate are prepared for the same reporting period as
theour Company. When necessary, adjustments are made to bring the accounting policies in line with those of
theour Company.
After application of the equity method,
theour Company determines whether it is necessary to recognize an impairment loss on its investment in its associate.
TheOur Company determines at each reporting date whether there is any objective evidence that the investment in associates is impaired. If this is the case,
theour Company calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognizes the amount in share of losses of associates in the income statement.
Upon loss of significant influence over the associate,
theour Company measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retaining investment and proceeds from disposal is recognized in profit or loss.
F-38
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.20
| 3.20 Government grant |
Government grants are recognized where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognized as other income on a systematic basis over the periods that the related costs, which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognized as
a liabilityincome in equal amounts over the expected useful life of the related asset.
The
For the year ended December 31, 2022, 2021 and 2020, the government grantsgrant received during 2019were $639, $271 and 2018 were immaterial. See$973, respectively, our Company recognized in the line item of other income, refer to Note 227(e).
3.21 Non-current assets held for further details.sale
| 3.21
| Non-current assets held for sale
|
TheOur Company classifies non-current assets and disposal groups as held for sale/distribution to owners if their carrying amounts will be recovered principally through a sale/distribution rather than through continuing use. Non-current assets and disposal groups are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
Property, plant and equipment and intangible assets once classified as held for sale/distribution to owners are not depreciated or amortized.
When equity method investments are classified as held for sale, the investor discontinues the use of the equity method from the date that the investment (or the portion of it) is classified as held for sale; instead, the associate or joint venture is then measured at the lower of its carrying amount and fair value less cost to sell.
| 3.22
| 3.22 Finance and other income |
Interest revenue shall be calculated by using the effective interest method. This shall be calculated by applying the effective interest rate to the gross carrying amount of a financial asset except for:
(a)purchased or originated credit-impaired financial assets. For those financial assets, the entity shall apply the credit-adjusted effective interest rate to the amortized cost of the financial asset from initial recognition.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.22 Finance and other income (continued)
(b)financial assets that are not purchased or originated credit-impaired financial assets but subsequently have become credit-impaired financial assets. For those financial assets, theour Company applies the effective interest rate to the amortized cost of the financial asset in subsequent reporting periods. Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms and is included in
revenueother operating income due to its operating nature.
Revenue is recognized when
the company’sour Company’s right to receive the payment is established, which is generally when shareholders approve the dividend.
F-39
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.23
| 3.23 Significant accounting judgements, estimates and assumptions |
The preparation of
theour Company’s consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
In the process of applying
theour Company’s accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognized in the consolidated financial statements:
Revenue recognition - identifying single performance obligation in SDI projects
SDI projects comprise various activities such as supply cables, installation, jointing services and testing services. Those tasks are activities to fulfil the cable management service (supply and installation) and not a separate promise within the context of the contract.
TheOur Company determines the supply cables and installation services are not capable of being distinct and identifies to be one performance obligation because of (i) the customer could not benefit from the installed cables on its own, neither using it or to sell it for an amount greater than scrap value; (ii)
theour Company is providing a significant integration service, and it would not be able to fulfil its promise to transfer the cables separately from its promise to the subsequent installation; (iii) the cables and installation are highly interrelated, and the customer could not benefit from the cables being delivered without subsequent installation.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.
TheOur Company based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of
theour Company. Such changes are reflected in the assumptions when they occur.
F-40
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.23
| Significant accounting judgements, estimates and assumptions3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
3.23 Significant accounting judgements, estimates and assumptions (continued)
Impairment of non-financial assets
At each reporting date or whenever events indicate that the asset’s value has declined or significant changes in the market with an adverse effect have taken place, theour Company assesses whether there is an indication that an asset in the scope of IAS 36 may be impaired. If any indication exists, theour Company completes impairment testing for the CGU to which the individual assets belong. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount of an individual asset or CGU is the higher of fair value less costs to sell and its value in use. The fair value less costs of disposal (FVLCD) calculation is based on available data from binding sale arrangements, conducted at arm’s length, for similar assets or observable market prices less incremental costs for disposal of the assets. The value in use (VIU) is measured at the net present value of the future cash flows the entity expects to derive from the asset or CGU. Cash flow projection involves subjective judgments and estimates which include the estimated useful lives of property, plant and equipment, capacity that generates future cash flows, capacity of physical output, potential fluctuations of economic cycle in the industry and theour Company’s operating situation.
Due to the implications of COVID-19 on global asset prices, availability of capital and risk appetites of market participants, the price may appear to be “distress sale” requiring adjustment in the fair value estimation. However, other than in extreme cases, such decreases in value should not be adjusted for a lack of current information or declines in trading. In addition, the FVLCD may not have the quoted price for the calculation because there may have been a significant reduction in trading volumes for a particular asset listed on a public market. Due to the difficulties in determining FVLCD, it is therefore more practical, where possible, to use VIU as recoverable amount.
When determining VIU, it is important that the estimates of future cash flows are realistic. However,, in the current environment, models of the future will need to incorporate unprecedented shock, as decreases in asset values, decline in demand for goods and services and supply chain disruptions may be dissimilar to any previously encountered scenario. This will make forecasting particularly difficult.
In 2020, our Company recognized an impairment loss of $198 at Sigma Cable due to lack of profitability and certain machinery and equipment would not generate the expected future cash flows. See Note 15 – Property, Plant and Equipment.
Fair value of financial instruments
Where the fair values of financial assets and financial liabilities recorded in the balance sheet cannot be derived from active markets, they are determined using valuation techniques including income approach (for example, the discounted cash flows model) or the market approach. Changes in assumptions about these factors could affect the reported fair value of the financial instruments. Please refer to Note 11 for more details.
Measurement of ECL allowance for trade receivables
The
Our Company applies the IFRS 9 simplified approach to measure lifetime expected loss allowance for trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of the sales over a period of 36 month before December 31,
20192022 and the historical credit loss experience within this period. The historical loss rates are adjusted to reflect current and forward-looking information on general economic conditions affecting the ability of the customers to settle the receivables.
TheOur Company has identified the default rate of the countries where it sells the goods and services as the most relevant factor and adjusts the historical loss rates based on the expected changes accordingly.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.23 Significant accounting judgements, estimates and assumptions (continued)
Measurement of ECL allowance for trade receivables (continued)
In addition, COVID-19 has impacted the ability of certain customers to settle the trade receivables, it may lead to a significant increase in the loss rate for trade receivables. Therefore, our Company considered how the timing and amount of cash flows generated by outstanding trade receivables might be affected and increase loss rates as necessary. Our Company may consider a longer time horizon when payment dates are deferred for a significant period.
Refer to Note 12 and Note 27 for more information regarding the impairment of trade receivables and the related credit risks.
Net realizable value of inventory
Net realized value is the estimated selling price in the ordinary course of business less estimated costs to completion and the estimated costs necessary to make the sale. Management makes reference to actual sales prices after reporting date when making their estimate of net realizable value.
Refer to Note 13 for more information regarding the net realizable value of inventory.
F-41
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.23
| Significant accounting judgements, estimates and assumptions (continued)
|
TaxesTaxes
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future taxable income. Given the wide range of international business relationships and the long-term nature and complexity of existing contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded.
TheOur Company establishes provisions, based on reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates. The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of tax regulations by the taxable entity and the taxing authority. Such differences of interpretation may arise on a wide variety of issues depending on the conditions prevailing in the respective domicile of the companies.
Deferred tax assets are recognized for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilized. Significant management judgement is required to determine the amount of deferred tax assets that can be recognized, based upon the likely timing and the level of future taxable profits together with future tax planning strategies.
As of December 31,
2019, the2022, our Company has
$20,580 (2018: $16,762)$20,660 (2021: $15,245) of tax losses carried forward. These losses related to subsidiaries that have a history of losses, do not expire and may not be used to offset taxable income elsewhere in
theour Company except for
$546 (2018: $644)$1,373 (2021: $204) that will be realized. The subsidiaries do not have any tax planning opportunities available that could support the recognition of these losses as deferred tax assets. On this basis,
theour Company has determined that it cannot recognize deferred tax assets on the tax losses carried forward.
If
theour Company was able to recognize all unrecognized deferred tax assets, profit and equity would have increased by
$5,068 (2018: $3,876; 2017: $3,947)$3,969 (2021: $4,858; 2020: $5,617). Further details on taxes are disclosed in Note 8.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3.23 Significant accounting judgements, estimates and assumptions (continued)
Post-employment benefits under defined benefit plans
In accordance with the Thailand labor law, Charoong Thai and its subsidiaries are obliged to make payment to retiring employees, at rate of 1 to 13 times of their final monthly salary rate, depending on the length of service. In addition, Charoong Thai also has the extra benefit plan to make payment to qualified retiring employees at rates of 1 to 26 times of their final monthly salary.
The cost of the defined benefit pension plan and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases and mortality rates. Due to the complexity of the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.
In determining the appropriate discount rate, management considers the inactive corporate bond trading in Thailand, taken into account the yields on Thai Government Bonds and extrapolated maturity corresponding to the expected duration of the defined benefit obligation.
The mortality rate is based on most recent mortality investigation on policyholders of life insurance companies in Thailand. Future salary increases and pension increases are based on expected future inflation rates derived from external economic data, together with historical experience of Charoong Thai.
Further details about the assumptions used, including a sensitivity analysis, are given in Note 21.
F-42
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3.
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
|
| 3.23
| Significant accounting judgements, estimates and assumptions (continued)
|
Revenue recognition of SDI projects
Changes
Revenue occurs when control transfers to the customer, either over a period of time or at a single point in
percentagetime, depending on the scope of
completion would result in changes in contracteach individual contract. When the transfer of control to the customer occurs over a period of time, revenue
andof SDI is accounted for using an input method (input costs
recognized into total expected input costs) to measure the
statementprogress used to determine the amount of
comprehensive income duringrelated revenue. When the
year. Significant estimation by management is also required in assessing the recoverabilitycomparison of
the contracts based on estimated total contract revenue
and contract costs. In makingto total expected input cost indicates a loss, a provision for the
estimation, management’s evaluation is basedentire loss on the
actual levelcontract shall be made in the period in which they become known. Due to the individual nature of
the work
to be performed
on each SDI contract, management’s estimation of total expected input costs is complex and
past experience.requires significant judgment.
The carrying amount of
theour Company’s gross amounts due from customers for contract work-in-progress is disclosed in Note 14.
F-43
4. NEW STANDARDS AND INTERPRETATIONS
4.1 Recently applied accounting pronouncements
Our Company has applied the following amendments for the first time for its annual reporting period commencing January 1, 2022:
Property, plant and equipment: proceeds before intended use – Amendments to IAS 16
Reference to the conceptual framework: Amendments to IFRS 3
Onerous contracts - Amendments to IAS 37
The amendments listed above had no impact on the consolidated financial statements of our Company in prior periods and are not expected to significantly affect the current or future periods.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
| NEW STANDARDS AND INTERPRETATIONS
|
4. NEW STANDARDS AND INTERPRETATIONS (continued) | 4.1
| Recently applied accounting pronouncements
|
(a)4.2 New and amended standard appliedaccounting pronouncements not effective in 2019
The Company has initially applied IFRS 16 from January 1, 2019. The nature and effect of the changes as a result of application of the new accounting standard is described below.
IFRS 16 Leases
IFRS 16 supersedes IAS 17, Leases and related interpretation, and it sets out the requirements for the recognition, measurement, presentation and disclosure of leases. IFRS 16 provides a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessor accounting still uses the dual classification approach to classify each lease as an operating lease or a finance lease.
The Company applied IFRS 16 initially on January 1, 2019 using the modified retrospective method. In accordance with the IFRS 16 transition guidance, the cumulative effect of adopting the new standard is recognized as an adjustment to the opening balance of retained earnings at January 1, 2019, with no restatement of comparative information.
Upon the application of IFRS 16 on January 1, 2019, the Company applied the following practical expedients permitted by the standard:
►the use of a single discount rate to a portfolio of leases with reasonably similar characteristics
| ►
| the accounting for operating leases with a remaining lease term of less than 12 months as at January 1, 2019 as short-term leases
|
| ►
| the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application, and
|
| ►
| the use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
|
F-44
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
| NEW STANDARDS AND INTERPRETATIONS (continued)
|
| 4.1
| Recently applied accounting pronouncements (continued)
|
The significant effects of adopting the IFRS 16 as of January 1, 2019 are summarized as below:
Affected items of consolidated balance sheet | As of December 31, 2018 | | Effect of application of new standards | | As of January 1, 2019 | | Remarks |
| US$’000 | | US$’000 | | US$’000 | | |
Assets | | | | | | | | | | |
Prepayments | | 1,140 | | | (59 | ) | | 1,081 | | B |
Lease assets* | | 66 | | | (66 | ) | | — | | A |
Right-of-use assets | | — | | | 3,801 | | | 3,801 | | A, B, C |
Prepaid land lease payments | | 978 | | | (978 | ) | | — | | B |
Total affected assets | | 2,184 | | | 2,698 | | | 4,882 | | |
Liabilities | | | | | | | | | | |
Financial lease liabilities - current | | 44 | | | 362 | | | 406 | | C |
Financial lease liabilities - non-current | | 46 | | | 2,336 | | | 2,382 | | C |
Total affected liabilities | | 90 | | | 2,698 | | | 2,788 | | |
* included in the line "Property, plant and equipment" in the balance sheet |
A. Lease assets of $66 previously recognized under finance leases were reclassified from property, plant and equipment to right-of-use assets.
B. Prepaid land lease payments of $59 and $978 previously classified as prepayment under current assets and prepaid land lease payments under non-current assets were reclassified to right-of-use assets.
C. The Company recognized right-of-use assets and lease liabilities for those leases previously classified as operating leases under IAS 17, except for short-term leases and leases of low-value asset. The Company recognized right-of-use assets based on the amount equal to the lease liabilities. Lease liabilities were recognized based on the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at January 1, 2019.
Additionally, operating cash flows increased and financing cash flows decreased by $354 for the year ended December 31, 2019 as repayments on the principal portion of non-finance lease liabilities were classified as cash flows from financing activities for the year ended December 31, 2019, where previously it was classified as operating cash flows.
F-45
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
| NEW STANDARDS AND INTERPRETATIONS (continued)
|
| 4.1
| Recently applied accounting pronouncements (continued)
|
Reconciliation of IAS 17 non-cancelled operating lease commitment to IFRS 16 lease liability:
| 2019
| |
| US$’000
| |
Operating lease commitments disclosed as at December 31, 2018
| | 3,263
| |
Add: finance lease liabilities recognized as at December 31, 2018
| | 90
| |
Discounted using the incremental borrowing rate at January 1, 2019
| | (380
| )
|
Recognition exemption for:
| | | |
Short-term leases
| | (169
| )
|
Leases of low-value assets
| | (16
| )
|
Lease liabilities recognized as at January 1, 2019
| | 2,788
| |
As of January 1, 2019, the weighted average discount rate was 3.48%.
(b) New and amended standard applied effective in 2018
The Company has initially applied IFRS 15 and IFRS 9 from January 1, 2018. The nature and effect of the changes as a result of adoption of these new accounting standard are described below.
IFRS 15 Revenue from contracts with customers
IFRS 15 supersedes IAS 11 Construction Contracts, IAS 18 Revenue and related interpretation, and it applies with limited exceptions, to all revenue arising from contracts with customers. IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers and requires the revenue be recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer.
IFRS 15 requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.
The Company adopted IFRS 15 using the modified retrospective method of adoption with the date of initial application of January 1, 2018. Under this method, the standard can be applied either to all contracts at the date of initial application or only to contracts that are not completed at this date. The Company elected to apply the standard retrospectively only to contracts that are not completed as of January 1, 2018. The Company opted to apply the practical expedient for contract modification to all modifications that occurred before the date of initial application.
The cumulative effect of initially applying IFRS 15 is recognized at the date of initial application as an adjustment to the opening balance of retained earnings. Therefore, the comparative information was not restated and continues to be reported under IAS 11, IAS 18 and related interpretations.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after January 1, 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.
F-46
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
| NEW STANDARDS AND INTERPRETATIONS (continued)
|
| 4.1
| Recently applied accounting pronouncements (continued)
|
The Company has elected not to restate prior period financial statements using the modified retrospective approach under IFRS 9 as of January 1, 2018. The comparative information has not been restated which continues to be reported under IAS 39. Differences arising from the adoption of IFRS 9 have been recognized directly in retained earnings and other components of equity.
The significant effects of adopting the new standards as of January 1, 2018 are summarized as below:
Affected items of consolidated balance sheet | | As of December 31, 2017 | | Effect of application of new standards | | As of January 1, 2018 | | Remarks |
| | US$’000 | | US$’000 | | US$’000 | | |
Assets | | | | | | | | | | | |
Contract assets - current | | | — | | | 162 | | | 162 | | A |
Gross amounts due from customers for contract work-in-progress | | | 162 | | | (162 | ) | | — | | A |
Trade receivables | | | 112,403 | | | 16 | | | 112,419 | | C |
Financial assets – available for sale | | | 2,747 | | | (2,747 | ) | | — | | B |
Financial assets at fair value through other comprehensive income | | | — | | | 2,747 | | | 2,747 | | B |
Deferred income tax assets | | | 3,022 | | | 4 | | | 3,026 | | D |
Total affected assets | | | 118,334 | | | 20 | | | 118,354 | | |
Liabilities | | | | | | | | | | | |
Contract liabilities - current | | | — | | | 113 | | | 113 | | E |
Total affected liabilities | | | — | | | 113 | | | 113 | | |
Equity | | | | | | | | | | | |
Retained earnings | | | 53,350 | | | (93 | ) | | 53,257 | | B, C, D, E |
Total affected equity | | | 53,350 | | | (93 | ) | | 53,257 | | |
Total affected liabilities and equity | | | 53,350 | | | 20 | | | 53,370 | | |
A. In accordance with IFRS 15, the Company reclassified gross amounts due from customers for contract work-in-progress in the amount of $162 to contract assets as of January 1, 2018.
B. Equity investments in non-listed equity investments previously classified as available-for-sale financial assets were reclassified and measured as financial assets at FVOCI because these investments are held as long-term strategic investments purpose. As a result, assets with fair value of $2,747 were reclassified from available-for-sale financial assets to financial assets at FVOCI and fair value gains of $1,717 were reclassified from the available-for-sale financial assets reserve to the FVOCI reserve on January 1, 2018, of which $843 was related to non-controlling interests.
C. The application of IFRS 9 has fundamentally changed the Company’s accounting for impairment losses for trade receivable by replacing IAS 39’s incurred loss approach with a forward looking ECL approach. Upon application of IFRS 9, the Company reversed impairment on trade receivables by $16. As a result, trade receivables and retained earnings increased by $16.
D. The Company recognized deferred income tax assets for the temporary differences arising from the adjustments upon initial application of IFRS 9 and IFRS 15. Deferred income tax assets and retained earnings both increased by $4.
F-47
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
| NEW STANDARDS AND INTERPRETATIONS (continued)
|
| 4.1
| Recently applied accounting pronouncements (continued)
|
E. In accordance with IFRS 15, the Company’s performance obligation to provide custodial and transportation services are recognized as contract liabilities under bill-and-hold agreements. After adopting IFRS 15, the Company recognizes revenue from custodial services over time and transportation revenue upon delivery. As of January 1, 2018, the balance of contract liabilities increased by $113, and retained earnings decreased by $113.
The following tables summarized the impacts of adopting IFRS 15 on the consolidated income statement for the year ended December 31, 2018 and its consolidated balance sheet as of December 31, 2018 for each of the line items affected. There was no material impact on the consolidated statement of cash flows for the year ended December 31, 2018.
Affected items of consolidated income statement for the year ended December 31, 2018 | As reported | | Adjustments | | Amounts without application of IFRS 15 | |
| US$’000 | | US$’000 | | US$’000 | |
Revenue | | 425,940 | | | (26 | ) | | 425,914 | |
Gross profit | | 36,248 | | | (26 | ) | | 36,222 | |
Operating profit | | 8,684 | | | (26 | ) | | 8,658 | |
Profit before tax | | 11,332 | | | (26 | ) | | 11,306 | |
Income tax expense | | (3,886 | ) | | 5 | | | (3,881 | ) |
Profit for the year | | 7,446 | | | (21 | ) | | 7,425 | |
Affected items of consolidated balance sheet as of December 31, 2018 | As reported | | Adjustments | | Amounts without application of IFRS 15 | |
| US$’000 | | US$’000 | | US$’000 | |
Assets | | | | | | | | | |
Contract assets - current | | 1,460 | | | (1,460 | ) | | — | |
Gross amounts due from customers for contract work-in-process | | — | | | 1,460 | | | 1,460 | |
Deferred income tax assets | | 3,919 | | | (18 | ) | | 3,901 | |
Total affected assets | | 5,379 | | | (18 | ) | | 5,361 | |
Liabilities | | | | | | | | | |
Other current liabilities | | 3,272 | | | (88 | ) | | 3,184 | |
Total affected liabilities | | 3,272 | | | (88 | ) | | 3,184 | |
Equity | | | | | | | | | |
Retained earnings | | 55,016 | | | 34 | | | 55,050 | |
Foreign currency translation reserve | | (15,251 | ) | | 1 | | | (15,250 | ) |
Non-controlling interests | | 71,788 | | | 35 | | | 71,823 | |
Total affected equity | | 111,553 | | | 70 | | | 111,623 | |
Total affected liabilities and equity | | 114,825 | | | (18 | ) | | 114,807 | |
F-48
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
| NEW STANDARDS AND INTERPRETATIONS (continued)
|
| 4.1
| Recently applied accounting pronouncements (continued)
|
Prior to the application of IFRS 15, the Company recognized revenue based on the accounting treatment of the sales of goods for bill and hold transactions. In accordance with IFRS 15, the Company allocated the transaction prices to those custodial and transportation services under bill and hold transactions, and recognizes revenues from custodial and transportation services only when the services fulfilled. As a result, the Company will recognized contract liabilities and adjusted related deferred income tax assets and equity accordingly.
Reclassifications are made to reflect the terms used under IFRS 15. Amounts previously presented in “Gross amounts due from customers for contract” are reclassified into “contract assets-current”.
| 4.2
| New accounting pronouncements not effective
|
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of theour Company’s financial statements are disclosed below. TheOur Company intends to adopt these standards, if applicable, when they become effective.
Sales or contribution of assets between an investor and its associate or joint venture-Amendments to IFRS 10 and IAS 28
In September 2014, the IASB issued amendments to IFRS 10, Consolidated Financial Statements and IAS 28, Investments in Associates and Joint Ventures, entitled Sales or Contribution of Assets between an Investor and its Associate or Joint Ventures. These narrow scope amendments clarify, that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not), and a partial gain or loss is recognized when a transaction involves assets that do not constitute a business. On December 17, 2015, the IASB issued an amendment that postpones the application of the amendments to IFRS 10 and IAS 28 indefinitely.The
Our Company does not expect the amendments to have an impact on its consolidated financial statements.
Definition of a business: Amendments to IFRS 3
In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities determine whether an acquired set of activities and assets a business or not. They clarify the minimum requirements for a business, remove the assessment of whether market participants are capable of replacing any missing elements, add guidance to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs, and introduce an optional fair value concentration test. The amendment applies to businesses acquired in annual reporting periods beginning on or after January 1, 2020. Earlier application is permitted.
Since the amendments apply prospectively to transactions or other events that occur on or after the date of first application, the Company will not be affected by these amendments on the date of transition.
Definition of material: Amendments to IAS 1 and IAS 8
In October 2018, the IASB issued amendments of IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors to align the definition of “material” across the standards and to clarify certain aspects of the definition. The new definition states that “information is material if omitting, misstating or obscuring if could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific report entity.” The amendments take effect for materiality judgements made in annual periods beginning on or after January 1, 2020, and are applied prospectively. Earlier application is permitted (the entity must disclose that fact).
The Company does not expect the amendments to have an impact on its consolidated financial statements.
F-49
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4.
| NEW STANDARDS AND INTERPRETATIONS (continued)
|
| 4.2
| New accounting pronouncements not effective (continued)
|
Classification of liabilities as current or non-current: Amendments to IAS 1
On January 23, 2020, the IASB issued a narrow-scope amendment to IAS 1 to clarify that liabilities are classified as either current or non-current, depending on the rights that exist at the end of the reporting period.
They:
| ►
| clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting date and align the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability;
|
| ►
| clarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability; and
|
They: | ►
| make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.
|
uclarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting date and align the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability;uclarify that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability; and make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.
The amendments are effective for annual reporting periods beginning on or after January 1,
20222023 and are to be applied retrospectively. Earlier application is permitted.
The amendment could affect the classification of liabilities, particularly for previously considered management’s intention to determine classification and for some liabilities that can be converted into equity.
TheOur Company is based on the contractual arrangement in place at the reporting date for the classification, thus,
theour Company does not expect the amendment to have an impact on its consolidated financial statements.
F-50
Definition of accounting estimate – Amendments to IAS 8
On February 12, 2021, the IASB issued amendments to IAS 8, in which it introduces a new definition of accounting estimate: clarify that they are monetary amounts in financial statements that are subject to measurement uncertainty. The amendments also clarify the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop accounting estimates. Distinguishing between accounting policies and accounting estimates is important because changes in accounting policies are generally applied retrospectively to past transactions and other past events as well as the current periods, while changes in accounting estimates are applied prospectively to future transactions and other future events. The amendments are effective for annual reporting periods beginning on or after January 1, 2023 and apply to
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. NEW STANDARDS AND INTERPRETATIONS (continued) 4.2 New accounting pronouncements not effective (continued)
changes in accounting policies and changes in accounting estimates that occur on or after the start that period. Earlier application is permitted as long as this fact is disclosed.
Our Company does not expect the amendments to have an impact to its consolidated financial statements.
Disclosure of accounting policies – Amendments to IAS 1 and IFRS Practice Statement 2
On February 15, 2021, the IASB issued amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements, in which it provides guidance and example to help entities apply materiality judgements to accounting policy disclosure. The amendments to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their “significant” accounting policies with a requirement to disclose their “material” accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures. The amendments to IAS 1 are applicable for annual reporting periods beginning on or after January 1, 2023 with earlier application permitted. Since the amendment to the Practice Statement 2 provide non-mandatory guidance on the application of the definition of material to accounting policy information, an effective date for these amendments is not necessary.
Our Company is currently assessing the impact of the amendments by re-visiting its accounting policy disclosures to ensure consistency with the amended standard.
Deferred tax related to assets and liabilities arising from a single transaction – Amendments to IAS 12
On May 7, 2021, the IASB issued the amendments to IAS 12 Income Taxes require companies to recognize deferred tax on transactions that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. They will typically apply to transactions such as leases of lessees and decommissioning obligations and will require the recognition of additional deferred tax assets and liabilities.
The amendments should be applied to transactions that occur on or after the beginning of the earliest comparative period presented. In addition, entities should recognize deferred tax assets (to the extent that it is probable that they can be utilized) and deferred tax liabilities at the beginning of the earliest comparative period for all deductible and taxable temporary differences associated with right-of-use assets and lease liabilities, and decommissioning obligations and corresponding amounts recognized as part of the cost of the related assets. The cumulative effect of recognizing these adjustments is recognized in retained earnings, or other component of equity, as appropriate. The amendments are effective for annual reporting periods beginning on or after January 2023. Early application of the amendments is permitted.
Our Company have already accounted for such transactions consistent with the new requirements. Our Company will not be affected by the amendments.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. SEGMENT INFORMATION
Each segment engages in business activities which generate revenues and incur expenses. Based upon the information provided to
theour Company’s chief operating decision maker (“CODM”) to make decisions on resource allocation and operating performance evaluation,
theour Company has determined that it has three reportable segments.
The
Our Company organizes its business segments along reporting lines and has three operating segments, consisting of the North Asia region, the Thailand region and the Rest of the World (“ROW”) region.
TheOur Company considers the economic characteristics similarity in determining the reportable segments.
As the three operating segments exceed the quantitative thresholds, they are also reportable segments. The accounting policies for segment information, including transactions entered between segments are generally the same as those described in the summary of significant accounting policies.
During 2018, CODM changed the measures of profitability by operating segments, replacing gross profit and gross profit margin with operating profit (loss) and operating profit (loss) margin. This change reflects a better explanation of the elements of performance. This change has been applied to comparative figures for 2017 presented in this document.
Inter-segment revenues are eliminated upon consolidation and reflected in the “adjustments and eliminations” column. All other adjustments and eliminations are part of detailed reconciliations presented further below.
5(b)Information about reportable segments
Year ended December 31, 2019 | North Asia | | Thailand | | ROW | | Total segments | | Corporate expense adjustments and eliminations | | Consolidated | | |
| Year ended
December 31, 2022 | | Year ended
December 31, 2022 | North
Asia | | Thailand | | ROW | | Total
segments | | Corporate
expense
adjustments
and
eliminations | | Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
Revenues | | | | | | | | | | | | | | Revenues | |
External customers | | 76,575 | | 172,379 | | 89,206 | | 338,160 | | — | | 338,160 | | External customers | 77,329 | | | 171,841 | | | 184,723 | | | 433,893 | | | — | | | 433,893 | |
Inter-segment | | — | | 6 | | — | | 6 | | (6 | ) | | — | | Inter-segment | — | | | (5) | | | — | | | (5) | | | 5 | | | — | |
Segment operating profit/(loss) | | 1,237 | | 3,042 | | (1,659 | ) | | 2,620 | | (2,884 | ) | | (264 | ) | Segment operating profit/(loss) | 241 | | | 2,636 | | | 7,768 | | | 10,645 | | | (3,093) | | | 7,552 | |
Depreciation and amortization | | (811 | ) | | (2,842 | ) | | (1,613 | ) | | (5,266 | ) | | (58 | ) | | (5,324 | ) | |
Depreciation from right of use assets | | (44 | ) | | — | | (441 | ) | | (485 | ) | | (22 | ) | | (507 | ) | |
Impairment of property, plant and equipment | | (549 | ) | | 3 | | — | | (546 | ) | | — | | (546 | ) | |
| Depreciation and amortization(including depreciation from right of use assets) | | Depreciation and amortization(including depreciation from right of use assets) | (1,247) | | | (3,058) | | | (1,448) | | | (5,753) | | | (82) | | | (5,835) | |
| Interest income | | 57 | | 403 | | 45 | | 505 | | 1 | | 506 | | Interest income | 68 | | | 49 | | | 2 | | | 119 | | | 1 | | | 120 | |
Interest expense | | (239 | ) | | (481 | ) | | (102 | ) | | (822 | ) | | (23 | ) | | (845 | ) | Interest expense | (91) | | | (787) | | | (608) | | | (1,486) | | | (2) | | | (1,488) | |
Income tax (expense)/benefit | | (561 | ) | | (1,235 | ) | | 105 | | (1,691 | ) | | (366 | ) | | (2,057 | ) | |
| Income tax expense | | Income tax expense | (354) | | | (420) | | | (1,979) | | | (2,753) | | | (55) | | | (2,808) | |
| | | | | | | | | | | | | | |
Other disclosures | | | | | | | | | | | | | | Other disclosures | |
Capital expenditure | | 552 | | 4,590 | | 242 | | 5,384 | | 78 | | 5,462 | | Capital expenditure | 1,486 | | | 1,780 | | | 541 | | | 3,807 | | | 1 | | | 3,808 | |
F-51
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.
| 5. SEGMENT INFORMATION (continued) |
5(b)Information about reportable segments (continued)
Year ended December 31, 2018 | North Asia | | Thailand | | ROW | | Total segments | | Corporate expense adjustments and eliminations | | Consolidated | | |
| Year ended
December 31, 2021 | | Year ended
December 31, 2021 | North
Asia | | Thailand | | ROW | | Total
segments | | Corporate
expense
adjustments
and
eliminations | | Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
Revenues | | | | | | | | | | | | | | Revenues | |
External customers | | 103,647 | | 213,424 | | 108,869 | | 425,940 | | — | | 425,940 | | External customers | 107,032 | | | 197,779 | | | 171,848 | | | 476,659 | | | — | | | 476,659 | |
Inter-segment | | 4,076 | | 392 | | 6,308 | | 10,776 | | (10,776 | ) | | — | | Inter-segment | — | | | 7 | | | — | | | 7 | | | (7) | | | — | |
Segment operating profit/(loss) | | 5,234 | | 9,539 | | (2,306 | ) | | 12,467 | | (3,143 | ) | | 9,324 | | Segment operating profit/(loss) | 4,523 | | | (13,537) | | | 6,690 | | | (2,324) | | | (3,009) | | | (5,333) | |
Depreciation and amortization | | (829 | ) | | (2,836 | ) | | (1,333 | ) | | (4,998 | ) | | (20 | ) | | (5,018 | ) | |
| Depreciation and amortization(including depreciation from right of use assets) | | Depreciation and amortization(including depreciation from right of use assets) | (1,074) | | | (2,752) | | | (1,566) | | | (5,392) | | | (102) | | | (5,494) | |
Impairment of property, plant and equipment | | — | | (11 | ) | | — | | (11 | ) | | — | | (11 | ) | Impairment of property, plant and equipment | — | | | (7) | | | — | | | (7) | | | — | | | (7) | |
Interest income | | 117 | | 611 | | 42 | | 770 | | (288 | ) | | 482 | | Interest income | 43 | | | 76 | | | 3 | | | 122 | | | 1 | | | 123 | |
Interest expense | | (397 | ) | | (748 | ) | | (34 | ) | | (1,179 | ) | | (21 | ) | | (1,200 | ) | Interest expense | (285) | | | (380) | | | (340) | | | (1,005) | | | (92) | | | (1,097) | |
Income tax (expense)/benefit | | (1,212 | ) | | (2,152 | ) | | 384 | | (2,980 | ) | | (906 | ) | | (3,886 | ) | Income tax (expense)/benefit | (2,104) | | | 4,223 | | | (1,539) | | | 580 | | | 765 | | | 1,345 | |
| | | | | | | | | | | | | | |
Other disclosures | | | | | | | | | | | | | | Other disclosures | |
Capital expenditure | | 1,188 | | 2,859 | | 451 | | 4,498 | | 10 | | 4,508 | | Capital expenditure | 11 | | | 5,585 | | | 2,018 | | | 7,614 | | | 937 | | | 8,551 | |
Year ended December 31, 2017 | North Asia | | Thailand | | ROW | | Total segments | | Corporate expense adjustments and eliminations | | Consolidated | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Revenues | | | | | | | | | | | | | | | | | | |
External customers | | 101,533 | | | 206,485 | | | 117,197 | | | 425,215 | | — | | | 425,215 | |
Inter-segment | | 890 | | | 1,044 | | — | | | 1,934 | | | (1,934 | ) | | — | |
Segment operating profit/(loss) | | 3,256 | | | 11,053 | | | 1,205 | | | 15,514 | | | (3,074 | ) | | 12,440 | |
Depreciation and amortization | | (979 | ) | | (2,760 | ) | | (1,314 | ) | | (5,053 | ) | | (3 | ) | | (5,056 | ) |
Impairment of property, plant and equipment | | (213 | ) | | (10 | ) | — | | | (223 | ) | — | | | (223 | ) |
Interest income | | 51 | | | 845 | | | 61 | | | 957 | | | (81 | ) | | 876 | |
Interest expense | | (428 | ) | | (553 | ) | | (52 | ) | | (1,033 | ) | | 67 | | | (966 | ) |
Income tax (expense)/benefit | | (1,395 | ) | | (2,727 | ) | | (342 | ) | | (4,464 | ) | | (676 | ) | | (5,140 | ) |
| | | | | | | | | | | | | | | | | | |
Other disclosures | | | | | | | | | | | | | | | | | | |
Capital expenditure | | 991 | | | 3,332 | | | 590 | | | 4,913 | | | — | | | 4,913 | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. SEGMENT INFORMATION (continued)
5(b) Information about reportable segments (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended
December 31, 2020 | North
Asia | | Thailand | | ROW | | Total
segments | | Corporate
expense
adjustments
and
eliminations | | Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Revenues | | | | | | | | | | | |
| External customers | 73,199 | | | 143,647 | | | 96,718 | | | 313,564 | | | — | | | 313,564 | |
| Inter-segment | — | | | — | | | — | | | — | | | — | | | — | |
| Segment operating profit/(loss) | 3,087 | | | 11,250 | | | (4,492) | | | 9,845 | | | (2,973) | | | 6,872 | |
| Depreciation and amortization(including depreciation from right of use assets) | (796) | | | (2,773) | | | (1,715) | | | (5,284) | | | (118) | | | (5,402) | |
| Impairment of property, plant and equipment | — | | | (4) | | | (198) | | | (202) | | | — | | | (202) | |
| Interest income | 94 | | | 192 | | | 33 | | | 319 | | | 1 | | | 320 | |
| Interest expense | (178) | | | (105) | | | (257) | | | (540) | | | (75) | | | (615) | |
| Income tax (expense)/benefit | (791) | | | (2,344) | | | (714) | | | (3,849) | | | (167) | | | (4,016) | |
| | | | | | | | | | | |
| Other disclosures | | | | | | | | | | | |
| Capital expenditure | 3,763 | | | 10,674 | | | 167 | | | 14,604 | | | — | | | 14,604 | |
Adjustments and eliminations
Corporate expenses, gain on disposal of investment, and share of gain (loss) of associates are not allocated to individual segments as the underlying instruments are managed on a group basis.
F-52
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.
| 5. SEGMENT INFORMATION (continued) |
5(c)Reconciliation of segment operating profit (loss)
| For the year ended December 31, | | | | | | | | | | | | | | | | |
| 2019 | | 2018 | | 2017 | | | For the year ended December 31, |
| US$’000 | | US$’000 | | US$’000 | | | 2022 | | 2021 | | 2020 |
Segment operating profit | | 2,620 | | 12,467 | | 15,514 | | |
Corporate expenses adjustments and eliminations | | (2,884 | ) | | (3,143 | ) | | (3,074 | ) | |
| | | US$’000 | | US$’000 | | US$’000 |
| Segment operating profit/(loss) | | Segment operating profit/(loss) | 10,645 | | | (2,324) | | | 9,845 | |
| Corporate expenses and others | | Corporate expenses and others | (3,093) | | | (3,009) | | | (2,973) | |
| | (264 | ) | | 9,324 | | | 12,440 | | | 7,552 | | | (5,333) | | | 6,872 | |
Other operating income | | 385 | | 805 | | 5,084 | | Other operating income | 1,027 | | | 587 | | | 814 | |
Other operating expenses | | (770 | ) | | (1,445 | ) | | (909 | ) | Other operating expenses | (512) | | | (227) | | | (129) | |
Operating profit | | (649 | ) | | 8,684 | | | 16,615 | | |
| Operating profit/(loss) | | Operating profit/(loss) | 8,067 | | | (4,973) | | | 7,557 | |
Finance costs | | (1,012 | ) | | (1,378 | ) | | (1,221 | ) | Finance costs | (1,650) | | | (1,251) | | | (744) | |
Finance income | | 506 | | 482 | | 876 | | Finance income | 120 | | | 123 | | | 320 | |
Share of loss of associates | | (3 | ) | | (3 | ) | | (3 | ) | Share of loss of associates | (1) | | | (1) | | | (1) | |
Loss on liquidation of subsidiary | | — | | — | | (261 | ) | |
Exchange gain | | 1,550 | | 1,741 | | 2,784 | | |
| Exchange gain/(loss) | | Exchange gain/(loss) | 143 | | | (4,425) | | | (579) | |
Other income | | 717 | | 1,817 | | 214 | | Other income | 889 | | | 671 | | | 1,173 | |
Other expense | | (3 | ) | | (11 | ) | | (336 | ) | Other expense | (3) | | | (1) | | | (1) | |
Profit before tax | | 1,106 | | | 11,332 | | | 18,668 | | |
| Profit/(loss) before tax | | Profit/(loss) before tax | 7,565 | | | (9,857) | | | 7,725 | |
5(d)Segment assets and liabilities
| | | | | | | | | | Corporate | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | adjustments | | | | | North
Asia | | Thailand | | ROW | | Total
segments | | Corporate
adjustments
and
eliminations | | Consolidated |
| North Asia | | Thailand | | ROW | | Total segments | | and eliminations | | Consolidated | | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | |
As of December 31, 2019 | | | | | | | | | | | | | | |
| As of December 31, 2022 | | As of December 31, 2022 | |
Total assets | | 49,379 | | | 165,579 | | | 76,618 | | | 291,576 | | | 7,335 | | | 298,911 | | Total assets | 54,534 | | | 168,423 | | | 133,516 | | | 356,473 | | | 14,546 | | | 371,019 | |
Total liabilities | | 14,212 | | | 26,706 | | | 21,834 | | | 62,752 | | | 7,724 | | | 70,476 | | Total liabilities | 13,649 | | | 62,584 | | | 75,863 | | | 152,096 | | | 7,495 | | | 159,591 | |
As of December 31, 2018 | | | | | | | | | | | | | | | | | | | |
| As of December 31, 2021 | | As of December 31, 2021 | | | | | | | | | | | |
Total assets | | 54,250 | | | 173,398 | | | 70,574 | | | 298,222 | | | 7,576 | | | 305,798 | | Total assets | 56,629 | | | 186,405 | | | 136,145 | | | 379,179 | | | 10,249 | | | 389,428 | |
Total liabilities | | 20,169 | | | 42,887 | | | 14,015 | | | 77,071 | | | 6,911 | | | 83,982 | | Total liabilities | 15,166 | | | 76,610 | | | 80,731 | | | 172,507 | | | 7,604 | | | 180,111 | |
Reconciliation
| As of December 31, | |
| 2019 | | 2018 | |
| US$’000 | | US$’000 | |
Segment operating assets | | 291,576 | | | 298,222 | |
Corporate and other assets | | 2,466 | | | 2,869 | |
Investment in associates | | 935 | | | 864 | |
Deferred tax assets | | 3,939 | | | 3,919 | |
Inter-segment elimination | | (5 | ) | | (76 | ) |
Total assets | | 298,911 | | | 305,798 | |
F-53
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.
| 5. SEGMENT INFORMATION (continued) |
5(d)Segment assets and liabilities (continued)
Reconciliation of assets:
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| US$’000 | | US$’000 |
| Segment operating assets | 356,473 | | | 379,179 | |
| Corporate and other assets | 6,598 | | | 2,173 | |
| Investment in associates | 805 | | | 835 | |
| Deferred tax assets | 7,143 | | | 7,241 | |
| Total assets | 371,019 | | | 389,428 | |
Reconciliation of liabilities:
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Segment operating liabilities | | 62,752 | | 77,071 | | Segment operating liabilities | 152,096 | | | 172,507 | |
Corporate liabilities | | 3,591 | | 3,019 | | Corporate liabilities | 3,298 | | | 3,499 | |
Deferred tax liabilities | | 4,139 | | 3,925 | | Deferred tax liabilities | 4,197 | | | 4,105 | |
Inter-segment elimination | | (6 | ) | | (33 | ) | |
Total liabilities | | 70,476 | | | 83,982 | | Total liabilities | 159,591 | | | 180,111 | |
5(d-1)The application of IFRS 16 increased the segment assets and liabilities as below:
| | | | | | | | | | | | | Corporate | | | | |
| | | | | | | | | | | | | adjustments | | | | |
| North Asia | | Thailand | | ROW | | Total segments | | and eliminations | | Consolidated | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | |
As of December 31, 2019 | | | | | | | | | | | | | | | | | | |
Assets | | — | | | — | | | 2,506 | | | 2,506 | | | 192 | | | 2,698 | |
Liabilities | | — | | | — | | | 2,552 | | | 2,552 | | | 205 | | | 2,757 | |
5(e)Disaggregated revenues and geographical information
The Company’s disaggregated revenues transitioned from reporting of Manufactured Products, Distributed Products and SDI segments in 2017 to reporting of Power, Enamel and Others product lines in 2018. The updated reporting of results best reflects the relevant information and granularity desired by all stakeholders to conduct decisions and operations. Reported results of Power, Enamel and Others product lines provide improved understanding and insight to the performance of the Company and its products and services.
(i)Revenue from external customers is summarized as the following major categories:
Year ended December 31, 2019 | North Asia | | Thailand | | ROW | | Total segments | | Corporate expense adjustments and eliminations | | Consolidated | | |
| Year ended
December 31, 2022 | | Year ended
December 31, 2022 | North
Asia | | Thailand | | ROW | | Total
segments | | Corporate
expense
adjustments
and
eliminations | | Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
Revenue from external customers | | | | | | | | | | | | | | Revenue from external customers | |
Power | | — | | 49,493 | | 78,686 | | 128,179 | | — | | 128,179 | | Power | 92 | | | 46,340 | | | 135,739 | | | 182,171 | | | — | | | 182,171 | |
Enamel | | 76,575 | | 102,997 | | — | | 179,572 | | — | | 179,572 | | Enamel | 76,002 | | | 102,122 | | | — | | | 178,124 | | | — | | | 178,124 | |
| SDI | | SDI | 1,209 | | | — | | | 44,722 | | | 45,931 | | | — | | | 45,931 | |
Others* | | — | | | 19,889 | | | 10,520 | | | 30,409 | | | — | | | 30,409 | | Others* | 26 | | | 23,379 | | | 4,262 | | | 27,667 | | | — | | | 27,667 | |
| | 76,575 | | | 172,379 | | | 89,206 | | | 338,160 | | | — | | | 338,160 | | | 77,329 | | | 171,841 | | | 184,723 | | | 433,893 | | | — | | | 433,893 | |
Timing of revenue recognition | | | | | | | | | | | | | | | | | | | Timing of revenue recognition | | | | | | | | | | | |
At a point in time | | 76,575 | | 172,031 | | 82,584 | | 331,190 | | — | | 331,190 | | At a point in time | 77,287 | | | 171,613 | | | 158,510 | | | 407,410 | | | — | | | 407,410 | |
Over time | | — | | | 348 | | | 6,622 | | | 6,970 | | | — | | | 6,970 | | Over time | 42 | | | 228 | | | 26,213 | | | 26,483 | | | — | | | 26,483 | |
| | 76,575 | | | 172,379 | | | 89,206 | | | 338,160 | | | — | | | 338,160 | | | 77,329 | | | 171,841 | | | 184,723 | | | 433,893 | | | — | | | 433,893 | |
* includes revenues from SDI service contracts, fabrication service contracts, and sale of other wires and cables products. | | |
F-54
*include revenues from fabrication service contracts, and sale of other wires and cables products.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.
| 5. SEGMENT INFORMATION (continued) |
5(e)
Disaggregated revenues and geographical information (continued)
Year ended December 31, 2018 | North Asia | | Thailand | | ROW | | Total segments | | Corporate expense adjustments and eliminations | | Consolidated | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Revenue from external customers | | | | | | | | | | | | | | | | | | |
Power | | — | | | 64,771 | | | 92,130 | | | 156,901 | | | — | | | 156,901 | |
Enamel | | 103,647 | | | 114,247 | | | — | | | 217,894 | | | — | | | 217,894 | |
Others* | | — | | | 34,406 | | | 16,739 | | | 51,145 | | | — | | | 51,145 | |
| | 103,647 | | | 213,424 | | | 108,869 | | | 425,940 | | | — | | | 425,940 | |
Timing of revenue recognition | | | | | | | | | | | | | | | | | | |
At a point in time | | 103,647 | | | 213,212 | | | 92,133 | | | 408,992 | | | — | | | 408,992 | |
Over time | | — | | | 212 | | | 16,736 | | | 16,948 | | | — | | | 16,948 | |
| | 103,647 | | | 213,424 | | | 108,869 | | | 425,940 | | | — | | | 425,940 | |
* includes revenues from SDI service contracts, fabrication service contracts, and sale of other wires and cables products. | |
The Company recognizes no
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended
December 31, 2021 | North
Asia | | Thailand | | ROW | | Total
segments | | Corporate
expense
adjustments
and
eliminations | | Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Revenue from external customers | | | | | | | | | | | |
| Power | — | | | 63,629 | | | 127,891 | | | 191,520 | | | — | | | 191,520 | |
| Enamel | 107,027 | | | 105,749 | | | — | | | 212,776 | | | — | | | 212,776 | |
| SDI | — | | | — | | | 39,476 | | | 39,476 | | | — | | | 39,476 | |
| Others* | 5 | | | 28,401 | | | 4,481 | | | 32,887 | | | — | | | 32,887 | |
| 107,032 | | | 197,779 | | | 171,848 | | | 476,659 | | | — | | | 476,659 | |
| Timing of revenue recognition | | | | | | | | | | | |
| At a point in time | 107,032 | | | 197,544 | | | 146,991 | | | 451,567 | | | — | | | 451,567 | |
| Over time | — | | | 235 | | | 24,857 | | | 25,092 | | | — | | | 25,092 | |
| 107,032 | | | 197,779 | | | 171,848 | | | 476,659 | | | — | | | 476,659 | |
*include revenues from performance obligations satisfiedfabrication service contracts, and sale of other wires and cables products.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year ended
December 31, 2020 | North
Asia | | Thailand | | ROW | | Total
segments | | Corporate
expense
adjustments
and
eliminations | | Consolidated |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Revenue from external customers | | | | | | | | | | | |
| Power | — | | | 48,851 | | | 78,779 | | | 127,630 | | | — | | | 127,630 | |
| Enamel | 73,179 | | | 57,971 | | | — | | | 131,150 | | | — | | | 131,150 | |
| Fabrication | — | | | 33,101 | | | — | | | 33,101 | | | — | | | 33,101 | |
| Others* | 20 | | | 3,724 | | | 17,939 | | | 21,683 | | | — | | | 21,683 | |
| 73,199 | | | 143,647 | | | 96,718 | | | 313,564 | | | — | | | 313,564 | |
| Timing of revenue recognition | | | | | | | | | | | |
| At a point in time | 73,199 | | | 143,463 | | | 86,050 | | | 302,712 | | | — | | | 302,712 | |
| Over time | — | | | 184 | | | 10,668 | | | 10,852 | | | — | | | 10,852 | |
| 73,199 | | | 143,647 | | | 96,718 | | | 313,564 | | | — | | | 313,564 | |
*include revenues from SDI service contracts (which amounted to US$15.6 million in previous years in 20192020), fabrication service contracts, and 2018.sale of other wires and cables products. | Year ended December 31,
| |
| 2017
| |
| US$’000
| |
Manufactured Products
| | 361,853
| |
Distributed Products
| | 41,985
| |
SDI
| | 21,377
| |
Total Revenue
| | 425,215
| |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. SEGMENT INFORMATION (continued)
5(e) Disaggregated revenues and geographical information (continued)
(ii)Revenue from external customers is attributed to individual countries based on the customer’s country of domicile and is summarized as follows:
| | For the year ended December 31, | | | For the year ended Current period end |
| 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Revenues from external customers | | | | | | | | Revenues from external customers | |
Thailand | | 116,160 | | 154,207 | | 158,565 | | Thailand | 153,164 | | | 168,773 | | | 128,868 | |
Singapore | | 46,218 | | 63,781 | | 76,453 | | Singapore | 118,789 | | | 95,116 | | | 44,477 | |
Australia | | 34,447 | | 37,594 | | 34,901 | | Australia | 60,299 | | | 67,652 | | | 45,161 | |
China | | 81,813 | | 111,917 | | 108,561 | | |
| China, Hong Kong, and Taiwan | | China, Hong Kong, and Taiwan | 82,187 | | | 118,219 | | | 77,411 | |
India | | 36,121 | | 45,008 | | 31,291 | | India | 779 | | | 1,248 | | | 2,860 | |
Southeast Asia | | 23,390 | | 13,339 | | 15,394 | | Southeast Asia | 18,663 | | | 25,643 | | | 14,774 | |
Northeast Asia | | 11 | | | 94 | | | 50 | | Northeast Asia | 12 | | | 8 | | | 13 | |
| | 338,160 | | | 425,940 | | | 425,215 | | | 433,893 | | | 476,659 | | | 313,564 | |
Countries in the Southeast Asia region include Cambodia, Vietnam, Indonesia, Brunei, Laos, Malaysia and Myanmar; countries in the Northeast Asia region include Japan and South Korea.
F-55
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5.
| SEGMENT INFORMATION (continued)
|
5(e)Disaggregated revenues and geographical information (continued)
(iii)Major customer information
Revenue from one customer in the ROW region amounted to $66,858 in 2022 represented 15.41% of 2022 consolidated revenue. Revenue from one customer in the ROW region amounted to $56,579 in 2021 represented 11.87% of 2021 consolidated revenue. Revenue from one customer in the Thailand region amounted to
$23,118$33,494 in 2020 represented
6.84%10.68% of
20192020 consolidated revenue.
Revenue from another customer in the ROW region amounted to $37,197 in 2018 and $36,518 in 2017 represented 8.73% and 8.59% of 2018 and 2017 consolidated revenue, respectively. 5(f) Non-current assets information
The total non-current assets other than financial instruments and deferred tax assets broken down by the country of domicile are summarized as follow:
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Non-current assets by country: | | | | | | Non-current assets by country: | |
Thailand | | 32,723 | | 28,407 | | Thailand | 37,653 | | | 40,423 | |
Singapore | | 7,869 | | 5,868 | | Singapore | 5,304 | | | 5,601 | |
China | | 5,661 | | 6,592 | | |
| China, Hong Kong, and Taiwan | | China, Hong Kong, and Taiwan | 10,313 | | | 10,725 | |
Australia | | 2,661 | | 2,684 | | Australia | 7,141 | | | 7,815 | |
Other | | 290 | | | 54 | | Other | 207 | | | 71 | |
Total non-current assets | | 49,204 | | | 43,605 | | Total non-current assets | 60,618 | | | 64,635 | |
F-56
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.
| MATERIAL PARTLY-OWNED6. MATERIAL PARTLY-OWNED SUBSIDIARIES
|
6(a)
Material subsidiariesThe
Our Company has subsidiaries with material non-controlling interests (“NCI”). Information regarding the subsidiaries is as follows:
Proportion of equity interest held by NCI:
| | Country of incorporation | As of December 31, | | | Country of incorporation and operation | As of December 31, |
Name | and operation | 2019 | | 2018 | | Name | 2022 | | 2021 |
Charoong Thai and its subsidiaries (“CTW Consolidated”) | Thailand | 49.07% | | 49.07% | | Charoong Thai and its subsidiaries (“CTW Consolidated”) | Thailand | 49.07 | % | | 49.07 | % |
SYE | China | 31.25% | | 31.25% | | SYE | China | 31.25 | % | | 31.25 | % |
From
APWC groupour Company perspective, SYE is considered an entity with material non-controlling interests and should be separated from
Charoong Thai group.CTW Consolidated.
SYE ceased production at the end of October of 2019 and has been restructured as a trading company in Shanghai that supplies mainly transformer, motor and coil manufacturers in the eastern part of China.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6. MATERIAL PARTLY-OWNED SUBSIDIARIES (continued)
6(b)
Summarized financial information about the subsidiariesThe summarized financial information of the subsidiaries is provided below. This information is based on amounts before inter-company eliminations:
Summarized income statements | CTW consolidated | |
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Revenue | | 172,385 | | | 213,424 | | | 207,529 | |
Profit before tax | | 4,352 | | | 11,736 | | | 12,985 | |
Income tax expense | | (1,235 | ) | | (2,150 | ) | | (2,727 | ) |
Profit for the year | | 3,117 | | | 9,586 | | | 10,258 | |
Other comprehensive income | | 9,194 | | | 3,965 | | | 10,182 | |
Total comprehensive income | | 12,311 | | | 13,551 | | | 20,440 | |
Profit attributable to non-controlling interests | | 1,378 | | | 4,509 | | | 4,896 | |
Dividends paid to non-controlling interests | | 2,763 | | | 2,181 | | | 1,943 | |
| | | | | | | | | |
| | | | | | | | | |
Summarized income statements | SYE | |
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Revenue | | 20,743 | | | 33,790 | | | 33,533 | |
Loss before tax | | (2,272 | ) | | (837 | ) | | (161,011 | ) |
Income tax expense | | — | | | — | | | — | |
Loss for the year | | (2,272 | ) | | (837 | ) | | (161,011 | ) |
Other comprehensive income/(loss) | | (46 | ) | | (255 | ) | | 345 | |
Total comprehensive loss | | (2,318 | ) | | (1,092 | ) | | (160,666 | ) |
Loss attributable to non-controlling interests | | (710 | ) | | (262 | ) | | (15 | ) |
Dividends paid to non-controlling interests | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | |
| Summarized statements of comprehensive income | CTW consolidated |
| For the year ended December 31, |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Revenue | 171,846 | | | 197,786 | | | 143,647 | |
| Profit/(loss) before tax | 2,063 | | | (16,038) | | | 11,793 | |
| Income tax expense | (420) | | | 4,223 | | | (2,344) | |
| Profit/(loss) for the year | 1,643 | | | (11,815) | | | 9,449 | |
| Other comprehensive loss | (3,696) | | | (12,699) | | | (1,406) | |
| Total comprehensive (loss)/income | (2,053) | | | (24,514) | | | 8,043 | |
| Profit/(loss) attributable to non-controlling interests | 806 | | | (5,815) | | | 4,631 | |
| Dividends paid to non-controlling interests | 563 | | | 2,815 | | | 1,228 | |
| | | | | |
| Summarized statements of comprehensive income | SYE |
| For the year ended December 31, |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Revenue | — | | | 530 | | | 6,291 | |
| Profit/(loss) before tax | 90 | | | (497) | | | (1,161) | |
| Income tax expense | — | | | — | | | — | |
| Profit/(loss) for the year | 90 | | | (497) | | | (1,161) | |
| Other comprehensive (loss)/income | (56) | | | 17 | | | 84 | |
| Total comprehensive loss | 34 | | | (480) | | | (1,077) | |
| Loss attributable to non-controlling interests | 28 | | | (155) | | | (363) | |
| Dividends paid to non-controlling interests | — | | | — | | | — | |
F-57
| | | | | | | | | | | | | | | | | | | | | | | |
| Summarized balance sheets | CTW consolidated | | SYE |
| As of December 31, | | As of December 31, |
| 2022 | | 2021 | | 2022 | | 2021 |
| US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Current assets | 127,855 | | | 141,282 | | | 375 | | | 565 | |
| Non-current assets | 54,899 | | | 59,547 | | | 1,058 | | | 1,266 | |
| Current liabilities | (45,909) | | | (68,142) | | | (772) | | | (1,204) | |
| Non-current liabilities | (16,677) | | | (8,477) | | | — | | | — | |
| Total equity | 120,168 | | | 124,210 | | | 661 | | | 627 | |
| | | | | | | |
| Equity attributable to: | | | | | | | |
| Equity holders of the parent | 61,202 | | | 63,260 | | | 454 | | | 431 | |
| Non-controlling interests | 58,966 | | | 60,950 | | | 207 | | | 196 | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6.
| 6. MATERIAL PARTLY-OWNED SUBSIDIARIES (continued) |
Summarized balance sheets | CTW consolidated | | SYE | |
| As of December 31, | | As of December 31, | |
| 2019 | | 2018 | | 2019 | | 2018 | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Current assets | | 127,539 | | | 141,761 | | | 9,038 | | | 11,293 | |
Non-current assets | | 49,009 | | | 42,691 | | | 1,385 | | | 1,881 | |
Current liabilities | | (15,350 | ) | | (33,715 | ) | | (8,239 | ) | | (8,671 | ) |
Non-current liabilities | | (11,358 | ) | | (8,161 | ) | | — | | | — | |
Total equity | | 149,840 | | | 142,576 | | | 2,184 | | | 4,503 | |
| | | | | | | | | | | | |
Equity attributable to: | | | | | | | | | | | | |
Equity holders of the parent | | 76,216 | | | 73,621 | | | 1,502 | | | 3,096 | |
Non-controlling interests | | 73,624 | | | 68,955 | | | 682 | | | 1,407 | |
| Summarized cash flow information | CTW consolidated | | Summarized cash flow information | CTW consolidated |
| For the year ended December 31, | | | For the year ended December 31, |
| 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Operating | | 10,776 | | 38,784 | | (24,018 | ) | Operating | 7,657 | | | (37,392) | | | 19,713 | |
Investing | | 2,319 | | (9,137 | ) | | 6,589 | | Investing | (951) | | | (2,496) | | | (10,952) | |
Financing | | (20,260 | ) | | (12,585 | ) | | 12,836 | | Financing | (7,726) | | | 42,981 | | | (5,118) | |
Effect of changes in exchange rate on cash | | 2,376 | | | (102 | ) | | 1,678 | | Effect of changes in exchange rate on cash | (1,008) | | | (3,333) | | | (87) | |
Net (decrease) increase in cash and cash equivalents | | (4,789 | ) | | 16,960 | | | (2,915 | ) | Net (decrease) increase in cash and cash equivalents | (2,028) | | | (240) | | | 3,556 | |
| | | | | | | | | | | | | | | |
| | | | | | | | |
Summarized cash flow information | SYE | | Summarized cash flow information | SYE |
| For the year ended December 31, | | | For the year ended December 31, |
| 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Operating | | 5,135 | | 3,648 | | 833 | | Operating | (265) | | | 318 | | | (1,844) | |
Investing | | (165 | ) | | (277 | ) | | (252 | ) | Investing | 230 | | | 65 | | | 278 | |
Financing | | (1,847 | ) | | (4,005 | ) | | (563 | ) | Financing | — | | | (1,226) | | | (769) | |
Effect of changes in exchange rate on cash | | (28 | ) | | (34 | ) | | 65 | | Effect of changes in exchange rate on cash | (36) | | | 16 | | | 98 | |
Net increase (decrease) in cash and cash equivalents | | 3,095 | | | (668 | ) | | 83 | | |
| Net decrease in cash and cash equivalents | | Net decrease in cash and cash equivalents | (71) | | | (827) | | | (2,237) | |
F-58
7. INCOME AND EXPENSES ITEMS
7(a) Other operating income
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Gain on disposal of investment property | 271 | | | — | | | — | |
| Gain on disposal of assets classified as held for sale | 240 | | | — | | | — | |
| Gain on disposal of property, plant, and equipment | 132 | | | 318 | | | 239 | |
| Rental income | 254 | | | 179 | | | 199 | |
| Reversal of allowance for other receivable | — | | | — | | | 80 | |
| Reversal of allowance for trade receivables for related parties | 1 | | | — | | | 11 | |
| Reversal of allowance for trade receivable | — | | | — | | | — | |
| Other operating income – others | 129 | | | 90 | | | 285 | |
| Total other operating income | 1,027 | | | 587 | | | 814 | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
| INCOME AND EXPENSES ITEMS
|
7. INCOME AND EXPENSES ITEMS (continued)7(a)
7(b) Other operating expenses
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Allowance for trade receivables | 509 | | | 205 | | | 124 | |
| Allowance for trade receivables for related parties | — | | | 15 | | | — | |
| Impairment of property, plant, and equipment | — | | | 7 | | | 4 | |
| Other operating expenses – others | 3 | | | — | | | 1 | |
| Total other operating expenses | 512 | | | 227 | | | 129 | |
7(c) Finance costs
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Interest on debts and borrowings | 1,408 | | | 1,027 | | | 536 | |
| Interest on leases liabilities | 80 | | | 70 | | | 79 | |
| Total interest expenses | 1,488 | | | 1,097 | | | 615 | |
| Banking charges | 162 | | | 154 | | | 129 | |
| Total finance costs | 1,650 | | | 1,251 | | | 744 | |
7(d) Finance income
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Gain on disposal of property, plant, and equipment | | 88 | | | 93 | | | 99 | |
Reversal of allowance for trade receivable | | 122 | | | — | | | — | |
Gain on disposal of assets classified as held for sale | | — | | | — | | | 4,525 | |
Reversal of allowance for foreseeable loss | | — | | | 507 | | | — | |
Other operating income – others | | 175 | | | 205 | | | 460 | |
Total other operating income | | 385 | | | 805 | | | 5,084 | |
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Interest income | 120 | | | 123 | | | 320 | |
| Total finance income | 120 | | | 123 | | | 320 | |
On December 13, 2016, the Company entered into an agreement to sell its buildings and land use rights at its Ningbo Pacific subsidiary.
7(e) Other income
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Government grants | 639 | | | 271 | | | 973 | |
| Net gain on financial instruments | 33 | | | 259 | | | 3 | |
| Dividend income | 97 | | | 106 | | | 108 | |
| Other income | 120 | | | 35 | | | 89 | |
| Total other income | 889 | | | 671 | | | 1,173 | |
The
transaction was completed in March 2017government grants for
a consideration of RMB 60.6 million, or approximately US$8.8 million (including $0.8 million tax related expenses). The Company recognized gain on disposal of assets classified as held for sale amounted $4,525 for the year
ended December 31, 2017.7(b)Other operating expenses
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Allowance for trade receivables for related parties | | — | | | 1 | | | 27 | |
Allowance for trade receivables | | — | | | 570 | | | 302 | |
Allowance for other receivable | | 30 | | | 53 | | | — | |
Allowance for foreseeable loss | | 193 | | | — | | | 276 | |
Impairment of property, plant, and equipment | | 546 | | | 11 | | | 223 | |
Other operating expenses – others | | 1 | | | 810 | | | 81 | |
Total other operating expenses | | 770 | | | 1,445 | | | 909 | |
For the year ended December 31, 2018, the Company recognized other operating expenses – others, which amounted to $749,2020 due to a write-offthe COVID-19 epidemic is US$882K.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
| 7. INCOME AND EXPENSES ITEMS (continued) |
7(c)Finance costs
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Interest on debts and borrowings | | 754 | | | 1,196 | | | 962 | |
Interest on leases liabilities | | 91 | | | 4 | | | 4 | |
Total interest expenses | | 845 | | | 1,200 | | | 966 | |
Banking charges | | 167 | | | 178 | | | 255 | |
Total finance costs | | 1,012 | | | 1,378 | | | 1,221 | |
7(d)Finance income
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Interest income | | 506 | | | 482 | | | 876 | |
Total finance income | | 506 | | | 482 | | | 876 | |
7(e)Other income
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Other income | | 462 | | | 1,712 | | | 114 | |
Dividend income | | 109 | | | 105 | | | 100 | |
Net gain on financial instruments | | 146 | | | — | | | — | |
Total other income | | 717 | | | 1,817 | | | 214 | |
7(f) Other Income forexpenses
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Others | 3 | | | 1 | | | 1 | |
| Total other expenses | 3 | | | 1 | | | 1 | |
7(g) Depreciation, amortization and lease expense included in the year ended December 31, 2018 includesconsolidated income from dischargestatements
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Included in cost of sales: | | | | | |
| Depreciation – tangible assets | 4,278 | | | 3,863 | | | 3,893 | |
| Depreciation – right of use assets | 133 | | | 127 | | | 121 | |
| Amortization – intangible assets | 24 | | | 21 | | | 19 | |
| Lease expenses | 1 | | | 1 | | | 2 | |
| Included in selling expenses: | | | | | |
| Depreciation – tangible assets | 116 | | | 108 | | | 92 | |
| Depreciation – right of use assets | 167 | | | 144 | | | 113 | |
| Amortization – intangible assets | — | | | — | | | 1 | |
| Lease expenses | 1 | | | 1 | | | 1 | |
| Included in general and administrative expenses: | | | | | |
| Depreciation – tangible assets | 538 | | | 619 | | | 590 | |
| Depreciation – right of use assets | 382 | | | 390 | | | 387 | |
| Amortization – intangible assets | 21 | | | 26 | | | 42 | |
| Depreciation – investment property | 176 | | | 196 | | | 144 | |
| Lease expenses | 12 | | | 4 | | | 14 | |
| 5,849 | | | 5,500 | | | 5,419 | |
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Others | | 3 | | | 9 | | | 4 | |
Net loss on financial instruments | | — | | | 2 | | | 332 | |
Total other expenses | | 3 | | | 11 | | | 336 | |
F-60
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7.
| 7. INCOME AND EXPENSES ITEMS (continued) |
7(g)Depreciation, amortization and lease expense included in the consolidated income statements
| For the year ended December 31, | |
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Included in cost of sales: | | | | | | | | | |
Depreciation – tangible assets | | 4,089 | | | 4,162 | | | 4,148 | |
Depreciation – right-of-use assets | | 135 | | | — | | | — | |
Amortization – intangible assets | | 10 | | | 9 | | | 9 | |
Operating lease expenses | | 3 | | | 16 | | | 15 | |
Included in selling expenses: | | | | | | | | | |
Depreciation – tangible assets | | 93 | | | 141 | | | 132 | |
Depreciation – right-of-use assets | | 112 | | | — | | | — | |
Amortization – intangible assets | | 1 | | | 1 | | | — | |
Operating lease expenses | | 1 | | | 184 | | | 193 | |
Included in general and administrative expenses: | | | | | | | | | |
Depreciation – tangible assets | | 552 | | | 598 | | | 657 | |
Depreciation – right-of-use assets | | 260 | | | — | | | — | |
Amortization – intangible assets | | 39 | | | 34 | | | 40 | |
Amortization – prepaid land lease payment | | — | | | 38 | | | 35 | |
Depreciation – investment property | | 33 | | | 35 | | | 35 | |
Operating lease expenses | | 170 | | | 200 | | | 201 | |
| | 5,498 | | | 5,418 | | | 5,465 | |
7(h)Employee benefitsbenefits expenses
| For the year ended December 31, | | | | | | | | | | | | | | | | |
| 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Included in cost of sales: | | | | | | | | Included in cost of sales: | |
Wages and salaries | | 14,429 | | 13,674 | | 13,474 | | Wages and salaries | 12,555 | | | 14,088 | | | 13,065 | |
Labor and health insurance costs | | 126 | | 162 | | 168 | | Labor and health insurance costs | 79 | | | 77 | | | 71 | |
Pension costs | | 994 | | 890 | | 869 | | Pension costs | 886 | | | 828 | | | 736 | |
Other employment benefits | | 816 | | 892 | | 817 | | Other employment benefits | 734 | | | 843 | | | 702 | |
Included in selling expenses: | | | | | | | | Included in selling expenses: | |
Wages and salaries | | 3,495 | | 3,685 | | 3,641 | | Wages and salaries | 3,881 | | | 4,191 | | | 3,557 | |
Labor and health insurance costs | | 12 | | 14 | | 14 | | Labor and health insurance costs | 9 | | | 8 | | | 7 | |
Pension costs | | 330 | | 324 | | 325 | | Pension costs | 337 | | | 360 | | | 300 | |
Other employment benefits | | 50 | | 68 | | 64 | | Other employment benefits | 25 | | | 36 | | | 14 | |
Included in general and administrative expenses: | | | | | | | | Included in general and administrative expenses: | |
Wages and salaries | | 8,117 | | 8,818 | | 8,364 | | Wages and salaries | 7,950 | | | 8,435 | | | 8,861 | |
Labor and health insurance costs | | 85 | | 224 | | 219 | | Labor and health insurance costs | 103 | | | 104 | | | 89 | |
Pension costs | | 757 | | 671 | | 656 | | Pension costs | 608 | | | 661 | | | 640 | |
Director fees | | 640 | | 1,046 | | 1,119 | | Director fees | 412 | | | 587 | | | 1,065 | |
Other employment benefits | | 286 | | | 325 | | | 342 | | Other employment benefits | 138 | | | 222 | | | 186 | |
Total employee benefits expenses | | 30,137 | | | 30,793 | | | 30,072 | | Total employee benefits expenses | 27,717 | | | 30,440 | | | 29,293 | |
The accrued compensation and retirement benefits for expatriates were included in employee benefits expenses and in accruals.
F-61
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAX
Under current Bermuda law,
the CompanyAPWC is not subject to tax on income or capital gains, nor is withholding tax of Bermuda imposed upon payments of dividends by
the CompanyAPWC to its shareholders.
The Company’s
APWC’s investments in the Operating Subsidiaries are held through subsidiaries incorporated in the British Virgin Islands (“BVI”). Under current BVI law, dividends from the BVI subsidiaries’ investments are not subject to income taxes and no withholding tax is imposed on payments of dividends by the BVI subsidiaries to
the Company.APWC.
The Operating Subsidiaries and equity investees are governed by the income tax laws of Singapore, Thailand, Australia,
the PRC and
the PRC.Taiwan. The corporate income tax rate in Singapore was 17% for each of the three years ended December 31,
2019,2022, and there is no withholding tax on dividends applicable to
theour Company. For Thailand, the statutory corporate income tax rate was 20% for each of the three years ended December 31,
20192022 and a withholding tax of 10% is levied on dividends received by
theour Company. Charoong Thai is listed on Stock Exchange of Thailand (“SET”). In Australia, the corporate income tax rate was 30% for
2016/2017, 2017/20182019/2020, 2020/2021 and
2018/20192021/2022 tax years. The applicable corporate income tax rate for the subsidiaries in the PRC was 25% for each of the three years ended December 31,
2019.2022. In Taiwan, the corporate income tax rate was 20% for each of the three years ended December 31, 2022.
Dividends received from the Operating Subsidiaries and equity investees may be subjected to withholding taxes. Under the current Singapore corporate tax system, dividends paid by a Singapore resident company is tax exempt, and is not subject to withholding taxes. In Australia, dividends paid to non-residents are exempt from dividend withholding taxes except when dividends are paid out of profit that is not taxed by Australian income tax (i.e. unfranked dividends). For Thailand, dividends paid by a company to any individual or corporate payee overseas are
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAX (continued)
subject to a withholding tax of 10%. Under the Corporate Income Tax Law of the PRC, dividend distribution of profits to foreign investor(s) is subject to withholding tax of 10%.
F-62
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
In Taiwan , the dividends or profit distributed to non-resident shareholders are subject to 21% withholding tax.The major components of income tax (benefits) expenses for the years ended December 31, 2019, 20182022, 2021 and 20172020 are:
| | | 2019 | | | 2018 | | | 2017 | | | 2022 | | 2021 | | 2020 |
| | US$’000 | | | US$’000 | | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Consolidated income statements | | | | | | | | | | | | | Consolidated income statements | |
Current income tax: | | | | | | | | | | | | | Current income tax: | |
Current income tax charge | | | 1,699 | | | | 4,068 | | | | 4,785 | | Current income tax charge | 3,547 | | | 3,078 | | | 3,376 | |
Previously unrecognized tax loss used to reduce current income tax | | | — | | | | (128 | ) | | | (1,066 | ) | |
| Previously unrecognized tax loss or temporary difference used to reduce current income tax | | Previously unrecognized tax loss or temporary difference used to reduce current income tax | (697) | | | (96) | | | (89) | |
Adjustments for current income tax of prior years | | | (16 | ) | | | 1 | | | | 348 | | Adjustments for current income tax of prior years | (54) | | | — | | | (1) | |
Total current income tax | | | 1,683 | | | | 3,941 | | | | 4,067 | | Total current income tax | 2,796 | | | 2,982 | | | 3,286 | |
Deferred tax expenses/(benefits): | | | | | | | | | | | | | Deferred tax expenses/(benefits): | |
Relating to origination and reversal of temporary differences | | | 374 | | | | 243 | | | | 1,210 | | Relating to origination and reversal of temporary differences | 12 | | | (4,327) | | | 782 | |
Relating to change in tax rate | | | — | | | | — | | | | — | | |
Previously unrecognized tax loss used to reduce deferred tax expenses | | | — | | | | (298 | ) | | | (137 | ) | |
| Previously unrecognized tax loss or temporary difference used to reduce deferred tax expenses | | Previously unrecognized tax loss or temporary difference used to reduce deferred tax expenses | — | | | — | | | (52) | |
Total deferred tax expenses/(benefits) | | | 374 | | | | (55 | ) | | | 1,073 | | Total deferred tax expenses/(benefits) | 12 | | | (4,327) | | | 730 | |
Income tax expense reported in the income statement | | | 2,057 | | | | 3,886 | | | | 5,140 | | |
| Income tax expenses (benefit) reported in the income statement | | Income tax expenses (benefit) reported in the income statement | 2,808 | | | (1,345) | | | 4,016 | |
| | | | | | | | | | | | | | | | | | |
Consolidated statements of comprehensive income | | | | | | | | | | | | | Consolidated statements of comprehensive income | |
Deferred tax related to items recognized in other comprehensive income during the year: | | | | | | | | | | | | | Deferred tax related to items recognized in other comprehensive income during the year: | |
Change in the fair value of equity instrument measured at fair value through other comprehensive income | | | | | | | | | | | | | Change in the fair value of equity instrument measured at fair value through other comprehensive income | |
Recognized during the year | | | 334 | | | | (84 | ) | | | (16 | ) | Recognized during the year | (270) | | | 147 | | | (358) | |
Effect of change in tax rate | | | — | | | | — | | | | — | | Effect of change in tax rate | — | | | — | | | — | |
Net loss on actuarial gains and losses | | | | | | | | | | | | | |
| Net income on actuarial gains and losses | | Net income on actuarial gains and losses | |
Recognized during the year | | | (345 | ) | | | (82 | ) | | | (154 | ) | Recognized during the year | 147 | | | 112 | | | 40 | |
Effect of change in tax rate | | | — | | | | — | | | | — | | Effect of change in tax rate | — | | | — | | | — | |
Income tax benefits charged to other comprehensive (loss) income | | | (11 | ) | | | (166 | ) | | | (170 | ) | |
| Income tax (benefit) expense charged to other comprehensive income (loss) | | Income tax (benefit) expense charged to other comprehensive income (loss) | (123) | | | 259 | | | (318) | |
F-63
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
| 8. INCOME TAX (continued) |
The parent company’s tax
APWC is
filedincorporated in Bermuda, which does not have a statutory tax rate. The provision for income taxes differs based on the tax incurred by the Operating Subsidiaries, in their respective jurisdiction.
TheOur Company determines its statutory tax rate based on its major commercial domicile that is its subsidiaries in Thailand. The reconciliation of
difference between tax computed at the statutory tax rate and
income tax (benefits) expenses reported in the
Company’s effective tax rateconsolidated income statement is as follows:
| | 2019 | | | 2018 | | | 2017 | | | | | | | | | | | | | | | | |
| | US$’000 | | | US$’000 | | | US$’000 | | | 2022 | | 2021 | | 2020 |
Profit before tax | | | 1,106 | | | | 11,332 | | | | 18,668 | | |
Tax at statutory rate of 20% (2018: 20%; 2017: 20%) | | | 221 | | | | 2,266 | | | | 3,734 | | |
| | | US$’000 | | US$’000 | | US$’000 |
| Profit/(loss) before tax | | Profit/(loss) before tax | 7,565 | | | (9,857) | | | 7,725 | |
| Tax at statutory rate of 20% (2021: 20%; 2020: 20%) | | Tax at statutory rate of 20% (2021: 20%; 2020: 20%) | 1,513 | | | (1,971) | | | 1,545 | |
Foreign income taxed at different rate | | | 499 | | | | 697 | | | | 1,151 | | Foreign income taxed at different rate | 1,332 | | | 1,465 | | | 1,100 | |
Expenses not deductible for tax purpose | | | 221 | | | | (33 | ) | | | 600 | | Expenses not deductible for tax purpose | 241 | | | 94 | | | 255 | |
Utilization of previously unrecognized tax losses | | | — | | | | (128 | ) | | | (1,066 | ) | |
| Utilization of previously unrecognized tax losses/temporary differences | | Utilization of previously unrecognized tax losses/temporary differences | (697) | | | (96) | | | (89) | |
Tax benefit arising from previously unrecognized tax losses | | | — | | | | (298 | ) | | | (137 | ) | Tax benefit arising from previously unrecognized tax losses | — | | | — | | | (52) | |
Net deferred tax asset not recognized | | | 949 | | | | 679 | | | | 78 | | Net deferred tax asset not recognized | 382 | | | 327 | | | 1,151 | |
Written-off deferred tax | | | 218 | | | | (4 | ) | | | 10 | | Written-off deferred tax | — | | | — | | | — | |
Tax exempt on income | | | (144 | ) | | | (135 | ) | | | (245 | ) | Tax exempt on income | (65) | | | (99) | | | (57) | |
Uncertain tax position | | | (454 | ) | | | 11 | | | | (270 | ) | Uncertain tax position | (102) | | | (1,173) | | | (273) | |
Return to provision adjustment | | | (16 | ) | | | 1 | | | | 348 | | Return to provision adjustment | (54) | | | — | | | (1) | |
Deferred tax liability arising from undistributed earnings | | | 215 | | | | 578 | | | | 602 | | Deferred tax liability arising from undistributed earnings | 96 | | | (309) | | | 270 | |
Withholding tax on dividends | | | 355 | | | | 270 | | | | 349 | | Withholding tax on dividends | 163 | | | 452 | | | 163 | |
Others | | | (7 | ) | | | (18 | ) | | | (14 | ) | Others | (1) | | | (35) | | | 4 | |
Income tax expense reported in income statement | | | 2,057 | | | | 3,886 | | | | 5,140 | | |
| Income tax expense/(benefit) reported in consolidated income statement | | Income tax expense/(benefit) reported in consolidated income statement | 2,808 | | | (1,345) | | | 4,016 | |
F-64
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8.
| 8. INCOME TAX (continued) |
Deferred tax relates to the following:
| | | Consolidated balance sheet | | | Consolidated income statement | | | Consolidated balance sheet | | Consolidated income statement |
| | As of December 31, | | | For the year ended Decembers 31, | | | As of December 31, | | For the year ended Decembers 31, |
| | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2017 | | | 2022 | | 2021 | | 2022 | | 2021 | | 2020 |
| | US$’000 | | | US$’000 | | | US$’000 | | | US$’000 | | | US$’000 | | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
Outside basis differences | | | (3,829 | ) | | | (3,614 | ) | | | 215 | | | | 578 | | | | 602 | | Outside basis differences | (3,886) | | | (3,790) | | | 96 | | | (309) | | | 270 | |
Revaluations of financial assets at fair value through other comprehensive income (2017: Revaluations of available-for-sale investment to fair value) | | | (679 | ) | | | (345 | ) | | | — | | | | — | | | | — | | |
| Revaluations of financial assets at fair value through other comprehensive income | | Revaluations of financial assets at fair value through other comprehensive income | (198) | | | (469) | | | — | | | — | | | — | |
Accrued interest income | | | (181 | ) | | | (154 | ) | | | 13 | | | | 12 | | | | 11 | | Accrued interest income | — | | | — | | | — | | | — | | | (172) | |
Unutilized building allowance (net) | | | (36 | ) | | | (133 | ) | | | (98 | ) | | | (95 | ) | | | 11 | | Unutilized building allowance (net) | (8) | | | (21) | | | (13) | | | 9 | | | (24) | |
Unused tax losses | | | 546 | | | | 644 | | | | 119 | | | | (459 | ) | | | 455 | | Unused tax losses | 1,373 | | | 204 | | | (1,158) | | | (162) | | | 481 | |
Allowance for doubtful accounts | | | 245 | | | | 290 | | | | 47 | | | | (97 | ) | | | (25 | ) | Allowance for doubtful accounts | 46 | | | 167 | | | 113 | | | 105 | | | (21) | |
Inventory impairment | | | 554 | | | | 657 | | | | 147 | | | | (236 | ) | | | (161 | ) | Inventory impairment | 2,897 | | | 3,170 | | | 150 | | | (2,914) | | | 137 | |
Rebates and other accrued liabilities | | | 472 | | | | 426 | | | | (46 | ) | | | (38 | ) | | | (6 | ) | Rebates and other accrued liabilities | 661 | | | 617 | | | (85) | | | (170) | | | (17) | |
Unpaid retirement benefits | | | 1,553 | | | | 1,353 | | | | (81 | ) | | | (54 | ) | | | (62 | ) | Unpaid retirement benefits | 1,281 | | | 1,327 | | | — | | | 26 | | | 41 | |
Deferred revenue and cost of sales | | | 23 | | | | 16 | | | | (6 | ) | | | (14 | ) | | | 393 | | Deferred revenue and cost of sales | 19 | | | 30 | | | 10 | | | (15) | | | 5 | |
Actuarial loss | | | 796 | | | | 450 | | | | — | | | | — | | | | — | | Actuarial loss | 498 | | | 644 | | | — | | | — | | | — | |
Unabsorbed depreciation | | | 637 | | | | 701 | | | | 57 | | | | (55 | ) | | | (45 | ) | Unabsorbed depreciation | 588 | | | 731 | | | 90 | | | (67) | | | 9 | |
Mark-to-Market value of forward contract | | | — | | | | 28 | | | | 28 | | | | (28 | ) | | | — | | |
| Provision for loss on onerous sale contract | | Provision for loss on onerous sale contract | — | | | 860 | | | 817 | | | (897) | | | — | |
| Leases | | Leases | 36 | | | 48 | | | 9 | | | 3 | | | (1) | |
Others | | | (301 | ) | | | (325 | ) | | | (21 | ) | | | 431 | | | | (100 | ) | Others | (361) | | | (382) | | | (17) | | | 64 | | | 22 | |
Deferred tax expenses / (benefits) | | | | | | | | | | | 374 | | | | (55 | ) | | | 1,073 | | |
| Deferred tax expenses/(benefits) | | Deferred tax expenses/(benefits) | | | | | 12 | | | (4,327) | | | 730 | |
Net deferred tax assets | | | (200 | ) | | | (6 | ) | | | | | | | | | | | | | Net deferred tax assets | 2,946 | | | 3,136 | | | | | | | |
Reconciliation of deferred tax assets, net
| | | 2019 | | | 2018 | | | 2017 | | | 2022 | | 2021 | | 2020 |
| | US$’000 | | | US$’000 | | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Opening balance as of January 1 | | | (6 | ) | | | (132 | ) | | | 526 | | Opening balance as of January 1 | 3,136 | | | (519) | | | (200) | |
Tax benefit/(expenses) during the period recognized in profit or loss | | | (374 | ) | | | 55 | | | | (1,073 | ) | |
Tax benefit/(expenses) during the period recognized in other comprehensive income | | | 11 | | | | 166 | | | | 170 | | |
| Tax (expense)/benefit during the period recognized in profit or loss | | Tax (expense)/benefit during the period recognized in profit or loss | (12) | | | 4,327 | | | (730) | |
| Tax benfit/(expense) during the period recognized in other comprehensive income | | Tax benfit/(expense) during the period recognized in other comprehensive income | 123 | | | (259) | | | 318 | |
Exchange difference on translation foreign operations | | | 169 | | | | (95 | ) | | | 245 | | Exchange difference on translation foreign operations | (301) | | | (413) | | | 93 | |
Closing balance as of December 31 | | | (200 | ) | | | (6 | ) | | | (132 | ) | Closing balance as of December 31 | 2,946 | | | 3,136 | | | (519) | |
The
Our Company offset tax assets and liabilities if and only if it has legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities related to income taxes levied by the same tax authority.
F-65
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TheOur Company has available unused net operating losses which arose in Thailand, China, Hong Kong, Singapore and AustraliaTaiwan as of December 31, 20192022 and 2018,2021, that may be applied against future taxable income and that expire as follows respectively:
| | As of December 31, | |
Year of expiration | | 2019 | | | 2018 | |
| | US$’000 | | | US$’000 | |
2019 | | | — | | | | 784 | |
2020 | | | 3,067 | | | | 3,020 | |
2021 | | | 5,246 | | | | 5,121 | |
2022 | | | 2,216 | | | | 2,105 | |
2023 | | | 4,855 | | | | 4,760 | |
2024 | | | 3,605 | | | | — | |
No expiration | | | 1,591 | | | | 972 | |
| | | 20,580 | | | | 16,762 | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAX (continued)
| | | | | | | | | | | | | | |
| | As of December 31, |
| Year of expiration | | 2022 | | 2021 |
| | US$’000 | | US$’000 |
| 2022 | | — | | | 2,090 | |
| 2023 | | 4,054 | | | 4,353 | |
| 2024 | | 2,955 | | | 3,156 | |
| 2025 | | 1,773 | | | 1,912 | |
| 2026 | | 3,011 | | | 3,184 | |
| 2027 | | 5,887 | | | — | |
| 2032 | | 184 | | | — | |
| No expiration | | 2,796 | | | 550 | |
| | 20,660 | | | 15,245 | |
Deferred tax assets have not been recognized in respect of these losses as they may not be used to offset taxable profits elsewhere in
theour Company, as they have arisen in subsidiaries that have been loss-making for some time, and there are no other tax planning opportunities or other evidence of recoverability in the near future.
TheOur Company did not recognize deferred tax assets of
$4,038 (2018: $3,084; 2017: $2,803)$3,017 (2021: $3,183; 2020: $3,751) in respect of tax losses amounting to
$18,422 (2018: $13,698; 2017: $12,769 ).$13,796 (2021: $14,228; 2020: $17,028).
In addition,
theour Company did not recognize deferred assets of
$1,030 (2018: $792 ; 2017: $1,144)$952 (2021: $1,675; 2020: $1,866) in relation to deductible temporary differences amounting to
$4,695 (2018: $3,557; 2017: $4,930)$4,881 (2021: $8,931; 2020: $9,683).
There are no income tax consequences attached to the payment of dividends in
either 20192022 or
20182021 by
the CompanyAPWC to its shareholders.
As of December 31,
20192022 and
2018, the2021, our Company is subject to taxation in PRC, Australia, Thailand, and Singapore.
TheOur Company’s tax years from
20112012 and forward are still subject to examination by the tax authorities in various tax jurisdictions.
A reconciliation of the beginning and ending amounts of uncertain tax position is as follows:
| Change in Uncertain Tax Positions | | 2019 | | | 2018 | | | 2017 | | Change in Uncertain Tax Positions | 2022 | | 2021 | | 2020 |
| | US$’000 | | | US$’000 | | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Balance as of January 1 | | | 674 | | | | 706 | | | | 828 | | Balance as of January 1 | 28 | | | 339 | | | 451 | |
Additions based on tax positions related to the current year | | | — | | | | — | | | | — | | |
Decrease due to lapses in statute of limitations | | | (215 | ) | | | — | | | | (175 | ) | Decrease due to lapses in statute of limitations | (26) | | | (312) | | | (144) | |
Exchange difference | | | (8 | ) | | | (32 | ) | | | 53 | | Exchange difference | (2) | | | 1 | | | 32 | |
Balance as of December 31 | | | 451 | | | | 674 | | | | 706 | | Balance as of December 31 | — | | | 28 | | | 339 | |
The
Our Company is not expecting there would be any reasonably possible change in the total amounts of uncertain tax position within twelve months of the reporting date. As of December 31,
2019, 2018,2022, 2021, and
20172020 the amount of uncertain tax position (excluding interest and penalties) included in the consolidated balance sheets that would, if recognized, affect the
effectiveincome tax
rateexpenses is
$451, $674$nil, $28 and
$706,$339, respectively.
F-66
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
TheOur Company recognized interest expense and penalties related to income tax matters as a component of income tax expense. The amount of related interest and penalties theour Company has provided as of the dates listed below were:
| | As of December 31, | |
| | 2019 | | | 2018 | | | 2017 | |
| | US$’000 | | | US$’000 | | | US$’000 | |
Accrued interest on uncertain tax position | | | 713 | | | | 867 | | | | 800 | |
Accrued penalties on uncertain tax position | | | 384 | | | | 461 | | | | 486 | |
Total accrued interest and penalties on uncertain tax position | | | 1,097 | | | | 1,328 | | | | 1,286 | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. INCOME TAX (continued)
| | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Accrued interest on uncertain tax position | — | | | 46 | | | 597 | |
| Accrued penalties on uncertain tax position | — | | | 28 | | | 339 | |
| Total accrued interest and penalties on uncertain tax position | — | | | 74 | | | 936 | |
For the years ended December 31,
2019, 20182022, 2021 and
2017, the2020, our Company recognized
$81, $108$nil, $5 and
$114$61 in interest and $nil, $nil and $nil in penalty, respectively. For the years ended December 31,
2019, 20182022, 2021 and
2017, the2020, our Company reversed
$223, $nil$42, $568 and
$276$227 in interest and
$71, $nil$26, $318 and
$87$72 in penalties, respectively, due to lapses in statute of limitations. For the years ended December 31,
2019, 20182022, 2021 and
2017,2020, the exchange difference
$(12)$(4),
$(41)$12 and
$ 65$50 relating to interests,
$(6)$(2),
$(25)$7 and
$38$27 relating to penalty were included in income tax expenses.
The
Our Company considers each uncertain tax positions individually, by first consider whether each position taken in the tax return is probable of being sustained on examination by the taxing authority. It should recognize a liability for each item that is not probable of being sustained. The liability then is measured using a single best estimate of the most likely outcome. The uncertain tax positions presented in the current tax liability is the total liability for uncertain tax positions.
F-67
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9.
EARNINGS (LOSS)EARNINGS PER SHARE(Loss) earnings
Earnings (loss) per share are calculated by dividing net
profit (loss)
profit attributable to equity holders of the parent by the weighted average number of shares outstanding during the year.
The CompanyAPWC does not have any dilutive securities. The treasury shares transaction resulted in an immediate reduction in outstanding shares used to calculate the weighted-average common shares outstanding for both basic and diluted
earnings (loss)
earnings per share.
The following table sets forth the computation of basic and diluted earnings attributable to common shareholders per share:
| | For the year ended December 31, | |
| | 2019 | | 2018 | | 2017 | |
| | US$’000 | | US$’000 | | US$’000 | |
| | (except for number of shares and earnings per share) | |
Numerator: | | | | | | | | | | |
Net (loss) profit attributable to APWC from continuing operations | | | (1,632 | ) | | 2,928 | | | 8,720 | |
Net (loss) profit attributable to APWC | | | (1,632 | ) | | 2,928 | | | 8,720 | |
| | | | | | | | | | |
Denominator: | | | | | | | | | | |
Weighted-average common shares outstanding – basic and diluted | | | 13,819,669 | | | 13,819,669 | | | 13,819,669 | |
| | | | | | | | | | |
(Loss) earnings per share – basic and diluted | | | | | | | | | | |
Continuing operations | | | (0.12 | ) | | 0.21 | | | 0.63 | |
Total (loss) earnings per share – basic and diluted | | | (0.12 | ) | | 0.21 | | | 0.63 | |
| | | | | | | | | | | | | | | | | |
| For the year ended Current period end |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| (except for number of shares and earnings per share) |
| Numerator: | | | | | |
| Net profit (loss) attributable to APWC from continuing operations | 3,874 | | | (2,642) | | | (552) | |
| Net profit (loss) attributable to APWC | 3,874 | | | (2,642) | | | (552) | |
| | | | | |
| Denominator: | | | | | |
| Weighted-average common shares outstanding – basic and diluted | 20,020,364 | | 13,819,669 | | 13,819,669 |
| | | | | |
| Earnings (loss) per share – basic and diluted | | | | | |
| Continuing operations | 0.19 | | | (0.19) | | | (0.04) | |
| Total earnings (loss) per share – basic and diluted | 0.19 | | | (0.19) | | | (0.04) | |
Income from continuing operations attributable to non-controlling interests are $681, $4,518,$883, $(5,870) and $4,808$4,261 for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, respectively.
10.
| CASH AND CASH EQUIVALENTS
|
| As of December 31, | |
| 2019 | | 2018 | |
| US$’000 | | US$’000 | |
Cash on hand and cash at banks | | 53,673 | | | 60,778 | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. CASH AND CASH EQUIVALENTS
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| US$’000 | | US$’000 |
| Cash on hand and cash at banks | 54,017 | | | 44,507 | |
| Bank overdrafts | — | | | (1,995) | |
| Balances per statement of cash flows | 54,017 | | | 42,512 | |
Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition. Other short-term deposits are presented as other receivables if they are pledged, or if they have a maturity over three months from the date of acquisition.
F-68
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED
11. FINANCIAL
STATEMENTSASSETS AND FINANCIAL LIABILITIES 11.
| FINANCIAL ASSETS AND FINANCIAL LIABILITIES
|
11(a)Other financial assets and liabilities
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Financial assets at fair value through other comprehensive income | | | | | | Financial assets at fair value through other comprehensive income | |
Equity instrument (Note 11(d)) | | 4,062 | | | 2,332 | | Equity instrument (Note 11(d)) | 1,553 | | | 2,929 | |
| | 4,062 | | | 2,332 | | | 1,553 | | | 2,929 | |
Financial liabilities at fair value through profit or loss | | | | | | | |
| Financial assets at fair value through profit or loss | | Financial assets at fair value through profit or loss | | | |
Foreign exchange forward contracts (Note 11(c)) | | 3 | | | 142 | | Foreign exchange forward contracts (Note 11(c)) | 39 | | | 249 | |
| | 3 | | | 142 | | | 39 | | | 249 | |
| (i)
| Financial assets and liabilities at fair value through profit or loss
|
(i)Financial assets and liabilities at fair value through profit or lossFinancial assets and liabilities at fair value through profit or loss reflect the changes in fair value of those foreign exchange forward contracts that are not designated in hedge relationships, but are intended to reduce the level of foreign currency risk for expected sales and purchase transactions.
| (ii)
| Financial assets at fair value through other comprehensive income - unquoted equity instrument
|
(ii)Financial assets at fair value through other comprehensive income - unquoted equity instrumentOn January 1, 2018, the date of initial application of IFRS 9,
theour Company elected to reclassify its unquoted equity instrument in Thai Metal Processing Co., Ltd (“TMP”), which is engaged in the fabrication of copper rods, from financial assets – available-for-sale to financial assets at fair value through other comprehensive income due to the investment being hold as a long-term strategic investment and not expected to be sold in the short to medium term. During the years ended December 31,
2019, 2018,2022, 2021, and
2017, the2020, our Company received dividends of
$109, $105,$97, $106, and
$100$108 from TMP, respectively, which were recorded in other income (Note 7(e)) in the consolidated income statements.
F-69
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.
| 11. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued) |
11(b)Interest-bearing loans and borrowings
Under the line of credit arrangements for short-term debt with
theour Company’s banks,
theour Company may borrow up to approximately
$287,017$254,851 and
$275,334$270,094 as of December 31,
20192022 and
2018,2021, respectively, on such terms as
theour Company and the banks may mutually agree upon. These arrangements do not have termination dates but are reviewed annually for renewal. As of December 31,
20192022 and
2018,2021, the unused portion of the credit lines was approximately
$207,928$162,074 and
$182,361,$153,250, respectively, which included unused letters of credit amounting to
$113,255$84,586 and
$92,256,$66,820, respectively.
Letters of credit are issued by
theour Company in the ordinary course of business through major financial institutions as required by certain vendor contracts. As of December 31,
20192022 and
2018, the2021, our Company had open letters of credit amounting to
$15,209$38,256 and
$22,426,$50,633, respectively. Liabilities relating to the opened letters of credit are included in current liabilities.
| As of December 31, | |
| 2019 | | 2018 | |
| Interest rate | Maturity | Local currency | | | | Interest rate | Maturity | Local currency | | | |
| % | | ‘000 | US$’000 | | % | | ‘000 | US$’000 | |
Current interest-bearing loans and borrowings | | | | | | | | | | | | |
Bank loans | | | | | | | | | | | | |
Bank loans | 5.00 ~ 5.50 | Mar. 2020 ~ Sept. 2020 | RMB$20,400 | | 2,929 | | 4.70 ~ 4.79 | Jan. 2019 ~ Sept. 2019 | RMB$42,100 | | 6,130 | |
Trust receipt | 1.90 ~ 2.70 | Jan. 2020 ~ Jun. 2020 | THB$161,018 | | 5,423 | | 1.10 ~ 2.10 | Jan. 2019 ~ Jun. 2019 | THB$602,150 | | 18,684 | |
Trust receipt | 3.05 | Feb. 2020 ~ Apr. 2020 | SGD$4,042 | | 3,004 | | | | | | | |
Total | | | | | 11,356 | | | | | | 24,814 | |
F-70
Interest bearing loans and borrowings are including current portion $45,576 and $62,083 as of December 31, 2022 and 2021, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| Interest rate | Maturity | Local currency | | | Interest rate | Maturity | Local currency | |
| % | | ‘000 | US$’000 | | % | | ‘000 | US$’000 |
| Interest-bearing loans and borrowings | | | | | | | | | |
| Bank loans (including bank overdrafts US$1,995 in 2021) | 4.94 | Mar. 2044 | AUD$4,589 | 3,113 | | | 3.07 | Mar. 2044 | AUD$7,458 | 5,410 | |
| Bank loans | 4.50 ~ 4.90 | Jul . 2023 | RMB$30,100 | 4,321 | | | 3.85 ~ 4.53 | Jul . 2022 | RMB$41,751 | 6,552 | |
| Bank loans | 5.42 | Dec. 2023 | SGD$6,000 | 4,470 | | | 1.98 | Dec. 2022 | SGD$5,000 | 3,696 | |
| Bank loans | 2.23 | Feb. 2024 | THB$312,602 | 9,100 | | | — | — | — | — | |
| Trust receipt | 1.60 ~ 2.20 | Jun. 2023 | THB$1,133,838 | 33,006 | | | 0.70 ~ 3.30 | Jun. 2022 | THB$1,648,835 | 49,729 | |
| Trust receipt | 5.04 ~ 5.81 | Apr. 2023 | SGD$4,994 | 3,721 | | | — | — | — | — | |
| Total | | | | 57,731 | | | | | | 65,387 | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.
| 11. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued) |
11(c)Hedging activities and derivatives
The
Our Company purchases copper on an ongoing basis as its operating activities require a continuous supply of copper for manufacturing products. To reduce the exposures to copper shortage, theour Company enters into purchase contracts with commitment of monthly minimum purchase at market prices for selected operating units. The majority of these transactions take the form of contracts that are entered into and continue to be held for the purpose of receipt or delivery of the copper based on theour Company’s expected purchase, sale or usage requirements. Such purchase commitment contracts are not deemed financial instruments or derivatives. To date, these contract positions have not had a material effect on theour Company’s financial position, results of operations, and cash flow. Whether the annual copper purchase quantity needs to be reduced for the subsequent development, please see the Note 29 Subsequent event.
| (ii)
| Foreign currency risk
|
(ii)Foreign currency riskThe
Our Company enters into foreign exchange forward contracts with the intention to reduce the foreign exchange risk of expected sales and purchase transactions. These contracts are entered into the periods consistent with foreign currency exposure of the underlying transaction, generally from one to 12 months. These contracts are not designated in hedge relationships, and are measured at fair value through profit or loss.
As of December 31,
20192022 and
2018, the2021, our Company had outstanding forward contracts with notional amounts of
$(0.9)$(10.5) million and
$(9.4)$(42.1) million, respectively. The outstanding forward contracts at December 31,
2019 and 20182022 mature between
June 10January 5, 2023 and
June 23, 2020 and AprilFebruary 29,
and June 17, 2019,2024, respectively.
TheOur Company recognized gain (loss) on forward contracts as other income (expenses) – refer to Note 7(e) and Note 7(f).
The forward contract balance varies with the expected foreign currency transactions and changes in foreign exchange rate.
| | 2019 | | 2018 | | | 2022 | | 2021 |
| Assets | | Liabilities | | Assets | | Liabilities | | | Assets | | Liabilities | | Assets | | Liabilities |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
Foreign currency forward contracts | | | | | | | | | | Foreign currency forward contracts | |
Fair value | | — | | 3 | | — | | 142 | | Fair value | 39 | | | 6 | | | 249 | | | — | |
F-71
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.
| 11. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued) |
Set out below is a comparison of the carrying amounts and fair value of
theour Company’s financial instruments that are carried in the financial statements:
| Carrying amount | | Fair value | |
| As of December 31, | | As of December 31, | |
| 2019 | | 2018 | | 2019 | | 2018 | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Financial assets-current | | | | | | | | | | | | |
Cash and cash equivalents | | 53,673 | | | 60,778 | | | 53,673 | | | 60,778 | |
Trade receivables | | 74,077 | | | 79,617 | | | 74,077 | | | 79,617 | |
Other receivables | | 6,868 | | | 12,422 | | | 6,868 | | | 12,422 | |
Due from related parties | | 11,566 | | | 12,061 | | | 11,566 | | | 12,061 | |
Financial assets-non-current | | | | | | | | | | | | |
Financial assets at fair value through other comprehensive income | | 4,062 | | | 2,332 | | | 4,062 | | | 2,332 | |
Long-term bank deposits* | | 1,246 | | | 887 | | | 1,246 | | | 887 | |
Total | | 151,492 | | | 168,097 | | | 151,492 | | | 168,097 | |
| | | | | | | | | | | | |
Financial liabilities-current | | | | | | | | | | | | |
Interest-bearing loans and borrowings | | 11,356 | | | 24,814 | | | 11,356 | | | 24,814 | |
Trade and other payables | | 16,879 | | | 21,127 | | | 16,879 | | | 21,127 | |
Due to related parties | | 3,284 | | | 2,997 | | | 3,284 | | | 2,997 | |
Financial liabilities at fair value through profit or loss | | 3 | | | 142 | | | 3 | | | 142 | |
Financial lease liabilities | | 574 | | | 44 | | | 574 | | | 44 | |
Financial liabilities-non-current | | | | | | | | | | | | |
Financial lease liabilities | | 2,254 | | | 46 | | | 2,254 | | | 46 | |
Total | | 34,350 | | | 49,170 | | | 34,350 | | | 49,170 | |
* included in other non-current assets | |
| (i)
| Methods and assumptions used to estimate fair value
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Carrying amount | | Fair value |
| As of December 31, | | As of December 31, |
| 2022 | | 2021 | | 2022 | | 2021 |
| US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Financial assets-current | | | | | | | |
| Financial assets at amortized cost | | | | | | | |
| Cash and cash equivalents | 54,017 | | | 44,507 | | | 54,017 | | | 44,507 | |
| Financial assets at fair value at fair value through profit | 39 | | | 249 | | | 39 | | | 249 | |
| Trade receivables | 81,982 | | | 103,564 | | | 81,982 | | | 103,564 | |
| Other receivables | 2,397 | | | 2,648 | | | 2,397 | | | 2,648 | |
| Due from related parties | 11,018 | | | 13,965 | | | 11,018 | | | 13,965 | |
| Financial assets-non-current | | | | | | | |
| Financial assets at fair value through other comprehensive income | 1,553 | | | 2,929 | | | 1,553 | | | 2,929 | |
| Financial assets at amortized cost | | | | | | | |
| Long-term bank deposits* | 1,354 | | | 1,725 | | | 1,354 | | | 1,725 | |
| Total | 152,360 | | | 169,587 | | | 152,360 | | | 169,587 | |
| | | | | | | |
| Financial liabilities-current | | | | | | | |
| Liabilities at amortized cost | | | | | | | |
| Interest-bearing loans and borrowings | 45,576 | | | 62,083 | | | 45,576 | | | 62,083 | |
| Trade and other payables | 39,891 | | | 44,784 | | | 39,891 | | | 44,784 | |
| Due to related parties | 16,613 | | | 11,865 | | | 16,613 | | | 11,865 | |
| Accruals | 21,218 | | | 23,374 | | | 21,218 | | | 23,374 | |
| Lease liabilities | 627 | | | 571 | | | 627 | | | 571 | |
| Financial liabilities-non-current | | | | | | | |
| Liabilities at amortized cost | | | | | | | |
| Interest-bearing loans and borrowings | 12,155 | | | 3,304 | | | 12,155 | | | 3,304 | |
| Lease liabilities | 1,947 | | | 1,916 | | | 1,947 | | | 1,916 | |
| Total | 138,027 | | | 147,897 | | | 138,027 | | | 147,897 | |
*included in other non-current assets
(i)Methods and assumptions used to estimate fair value
The fair value of the financial assets and liabilities is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
| ►
| Cash and cash equivalents, trade receivables, other receivables, due from related parties, trade and other payables, due to related parties, and financial lease liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.
|
| ►
| Fixed-rate and variable-rate receivables are evaluated by the Company based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances were provided to account for the expected losses of these receivables. As of December 31, 2019 and 2018, the carrying amounts of such receivables, net of allowances, were not materially different from their calculated fair values.
|
uCash and cash equivalents, trade receivables, other receivables, due from related parties, trade and other payables, due to related parties, and financial lease liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. | ►
| Fixed rate long-term bank deposits and fixed rate and variable-rate borrowings are evaluated using discounted cash flows and the market rates or current rates for deposits of similar remaining maturities.
|
| ►
| Fair value of financial liabilities at fair value through profit or loss - derivatives is derived from inputs other than quoted prices that are observable for the asset or liability.
|
F-72
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11.
| FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
|
| (i)
| Methods and assumptions used to estimate fair value (continued)
|
11. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued) | ►
| Fair value of interest-bearing borrowings and loans are determined by using discounted cash flow method with discount rate that reflects the issuer’s borrowing rate as of the end of the reporting period. The non-performance risk as of December 31, 2019 was assessed to be insignificant.
|
11(d) Fair values (continued) | (ii)
| Description of significant unobservable inputs to valuation
|
(i)Methods and assumptions used to estimate fair value (continued) | Valuation technique | Significant unobservable inputs | Liquidity discount (2019 and 2018) | | Sensitivity of the input to fair value |
| | | | | | 2019 | 2018 |
Financial asset | | | | | | | |
Unquoted equity instrument | Market Approach Method | Liquidity Discount | 30% | | 5% decrease in the discount would increase in fair value by $290 | 5% decrease in the discount would increase in fair value by $167 |
uFixed rate long-term bank deposits and fixed rate and variable-rate borrowings are evaluated using discounted cash flows and the market rates or current rates for deposits of similar remaining maturities.
uFair value of financial liabilities at fair value through profit or loss - derivatives is derived from inputs other than quoted prices that are observable for the asset or liability.
uFair value of interest-bearing borrowings and loans are determined by using discounted cash flow method with discount rate that reflects the issuer’s borrowing rate as of the end of the reporting period. The non-performance risk as of December 31, 2022 was assessed to be insignificant.
(ii)Description of significant unobservable inputs to valuation
| | | | | | | | | | | | | | | | | | | | |
| Valuation technique | Significant unobservable inputs | Liquidity discount
(2022 and 2021) | | Sensitivity of the input to fair value |
| | | | | 2022 | 2021 |
| Financial asset | | | | | | |
| Unquoted equity instrument | Market Approach Method | Liquidity Discount | 30% | | 5% decrease in the discount would increase in fair value by $111 | 5% decrease in the discount would increase in fair value by $209 |
Our Company estimates the fair value of investment in equity instrument by using the market approach (market comparatives approach). The key in this method is the selection of quoted comparable companies and accommodate adjustments to bring the accounts of different companies into a broadly consistent framework for analysis. Then, select appropriate Indicators of Value. The followings should be taken into account:
| ►
| Enterprise Value (EV) versus Market Capitalization;
|
| ►
| Earnings-based: EBITDA +/or EBIT versus Net Earnings +/or Net Cash Flow
|
uEnterprise Value (EV) versus Market Capitalization; | ►
| Balance Sheet based: Net Total Assets versus Shareholders Funds
|
uEarnings-based: EBITDA +/or EBIT versus Net Earnings +/or Net Cash FlowuBalance Sheet based: Net Total Assets versus Shareholders Funds
Discount for the lack of liquidity to reflect the lesser liquidity of this equity instrument compared with those of its comparable public company peers.
TheOur Company assessed the discount for the lack of liquidity to be 30 percent on the basis of relevant studies applicable in the region and industry as well as on the specific facts and circumstances of the equity instrument. The equity instrument’s finance performance is characterized by stable, consistent growth and profitability.
TheOur Company believes the liquidity discount of 30% would be appropriate.
The
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)
11(d) Fair values (continued)
(ii)Description of significant unobservable inputs to valuation (continued)
Our Company carries the equity instrument as financial assets at fair value through other comprehensive income classified as level 3 within the fair value hierarchy. A reconciliation of the beginning and closing balances is summarized below:
| | 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
At January 1 | | 2,332 | | 2,747 | | At January 1 | 2,929 | | | 2,271 | |
Re-measurement financial assets to fair value, recognized in other comprehensive income/(loss) | | 1,670 | | (419 | ) | |
| Re-measurement financial assets to fair value, recognized in other comprehensive (loss) /income | | Re-measurement financial assets to fair value, recognized in other comprehensive (loss) /income | (1,352) | | | 734 | |
Exchange difference on translation | | 60 | | | 4 | | Exchange difference on translation | (24) | | | (76) | |
At December 31 | | 4,062 | | | 2,332 | | At December 31 | 1,553 | | | 2,929 | |
F-73
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12.
| TRADE AND OTHER RECEIVABLES
|
| As of December 31, | |
| 2019 | | 2018 | |
| US$’000 | | US$’000 | |
Trade receivables | | 75,627 | | | 81,274 | |
Less: Loss allowances | | (1,550 | ) | | (1,657 | ) |
Trade receivable, net | | 74,077 | | | 79,617 | |
Other receivables | | 6,986 | | | 12,502 | |
Less: Loss allowances | | (118 | ) | | (80 | ) |
Other receivable, net | | 6,868 | | | 12,422 | |
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| US$’000 | | US$’000 |
| Trade receivables | 83,319 | | | 104,405 | |
| Less: Loss allowances | (1,337) | | | (841) | |
| Trade receivable, net | 81,982 | | | 103,564 | |
| Other receivables | 2,397 | | | 2,683 | |
| Less: Loss allowances | — | | | (35) | |
| Other receivable, net | 2,397 | | | 2,648 | |
As of December 31, 2022 and 2021, trade receivables were all from contracts with customers. And as of January 1, 2021, the balance of trade receivables from contracts with customers was $82,071.
12(a) Movement in the loss allowance on trade receivables
| | 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
At January 1 | | 1,657 | | 3,456 | | At January 1 | 841 | | | 1,414 | |
Charge for the year | | 72 | | 726 | | Charge for the year | 712 | | | 383 | |
Write-off | | (1 | ) | | (2,292 | ) | Write-off | (171) | | | (734) | |
Unused amounts reversed | | (194 | ) | | (156 | ) | Unused amounts reversed | (204) | | | (170) | |
Currency translation adjustment | | 19 | | (74 | ) | Currency translation adjustment | (2) | | | (65) | |
Reclassification | | (3 | ) | | (3 | ) | Reclassification | 161 | | | 13 | |
At December 31 | | 1,550 | | | 1,657 | | At December 31 | 1,337 | | | 841 | |
The Company recorded a loss allowance on trade receivables amounted to $2.0 million, for a specific customer
| | | | | | | Past due | |
| Total | | Current | | 1-30 days | | 31-60 days | | 61-90 days | | 91-120 days | | >120 days | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | |
December 31, 2019 | | | | | | | | | | | | | | | | | | | | | |
Expected loss rate | 2.05% | | 0.14% | | 0.76% | | 3.75% | | 9.52% | | 23.89% | | 75.97% | |
Gross carrying amount - trade receivables | | 75,627 | | | 59,867 | | | 9,979 | | | 3,759 | | | 294 | | | 180 | | | 1,548 | |
Loss allowances | | 1,550 | | | 86 | | | 76 | | | 141 | | | 28 | | | 43 | | | 1,176 | |
Trade receivable, net | | 74,077 | | | 59,781 | | | 9,903 | | | 3,618 | | | 266 | | | 137 | | | 372 | |
| | | | | | | | | | | | | | | | | | | | | |
December 31, 2018 | | | | | | | | | | | | | | | | | | | | | |
Expected loss rate | 2.04% | | 0.07% | | 0.86% | | 3.95% | | 20.18% | | 31.71% | | 64.70% | |
Gross carrying amount - trade receivables | | 81,274 | | | 67,318 | | | 9,183 | | | 2,276 | | | 327 | | | 82 | | | 2,088 | |
Loss allowances | | 1,657 | | | 45 | | | 79 | | | 90 | | | 66 | | | 26 | | | 1,351 | |
Trade receivable, net | | 79,617 | | | 67,273 | | | 9,104 | | | 2,186 | | | 261 | | | 56 | | | 737 | |
| | | | | | | | | | | | | | | | | | | | | |
F-74
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12.
| 12. TRADE AND OTHER RECEIVABLES (continued) |
12(b) Aging analysis of trade receivables
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | Past due |
| Total | | Current | | 1-30 days | | 31-60 days | | 61-90 days | | 91-120 days | | >120 days |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| December 31, 2022 | | | | | | | | | | | | | | | | | | | | |
| Expected loss rate | 1.60% | | 0.09% | | 1.00% | | 2.40% | | 10.74% | | 37.04% | | 98.35% |
| Gross carrying amount - trade receivables | | 83,319 | | | | 69,607 | | | | 10,166 | | | | 2,127 | | | | 298 | | | | 27 | | | | 1,094 | |
| Loss allowances | | 1,337 | | | | 66 | | | | 102 | | | | 51 | | | | 32 | | | | 10 | | | | 1,076 | |
| Trade receivable, net | | 81,982 | | | | 69,541 | | | | 10,064 | | | | 2,076 | | | | 266 | | | | 17 | | | | 18 | |
| | | | | | | | | | | | | | | | | | | | |
| December 31, 2021 | | | | | | | | | | | | | | | | | | | | |
| Expected loss rate | 0.81% | | 0.11% | | 0.68% | | 4.77% | | 7.14% | | 3.03% | | 53.12% |
| Gross carrying amount - trade receivables | | 104,405 | | | | 90,080 | | | | 11,140 | | | | 1,572 | | | | 504 | | | | 66 | | | | 1,043 | |
| Loss allowances | | 841 | | | | 98 | | | | 76 | | | | 75 | | | | 36 | | | | 2 | | | | 554 | |
| Trade receivable, net | | 103,564 | | | | 89,982 | | | | 11,064 | | | | 1,497 | | | | 468 | | | | 64 | | | | 489 | |
12(c)Accounting policy for impairment of trade receivables
The
Our Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on
theour Company’s historical credit loss experience, adjusted to reflect current and forward-looking information on general economic conditions affecting the ability of the customers to settle the receivables.
The impairment of trade receivables was assessed based on the incurred loss model as of December 31, 2017. The Company measured estimated impairment losses on trade receivables based on the inability of its customers to make required payments. The Company considered the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, customer financial condition, past transaction history with the customer, current economic industry trends, and changes in customer payment terms.
12(d)Material collateral obtained
The
Our Company obtained collateral in respect of doubtful receivables from customers. The collateral takes the form of a lien over the customer’s assets and gives
theour Company a claim on these assets for the doubtful receivables.
In March 2017, a lawsuit was filed by a debtor to rescind the foreclosure that
theour Company has undertaken on the collateral in Thailand.
TheOur Company’s foreclosure prevailed according to the judgement from the Appeal Court on November 28, 2017. The debtor’s petition reached to the Supreme Court on June 19, 2018, and was denied on March 27, 2019.
TheOur Company performed a valuation to determine the fair value of the collateral. As of December 31, 2019,
and 2018, the fair value of the collateral was $1,339,
and $1,200, respectively, which was lower than the amount of the associated delinquent account, and
theour Company recognized an impairment loss of $30
and $52 in other operating expenses,
respectively.accordingly. In June 2020, the collateral was auctioned off and our Company received payment of $1,060 to settle the net amount of $1,242 owed by the customer that was net of allowance of $111. Our Company recognized an additional loss of $182 for the year ended December 31, 2020.
See Note 27(b) credit risk of trade receivables for discussions on how
theour Company manages and measures credit quality of trade receivables that are neither past due nor impaired.
12(e)Other receivables pledged as collateral
The carrying amounts of other receivables pledged as collateral against credit facilities received from financial institutions are disclosed in Note 27(e)(ii).
F-75
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Raw materials and supplies | | 19,712 | | 25,717 | | Raw materials and supplies | 26,449 | | | 23,928 | |
Work in progress | | 19,118 | | 15,598 | | Work in progress | 17,945 | | | 24,791 | |
Finished goods | | 50,309 | | | 46,592 | | Finished goods | 86,214 | | | 80,078 | |
| | 89,139 | | | 87,907 | | |
Allowance for inventories | | (3,952 | ) | | (3,982 | ) | |
Total inventories at the lower of cost and net realizable value | | 85,187 | | | 83,925 | | Total inventories at the lower of cost and net realizable value | 130,608 | | | 128,797 | |
Inventories recognized as an expense during the year ended
December 31, 2019, December 31, 20182022, 2021 and
December 31, 20172020 amounted to
$313,695, $388,079$387,227, $441,371 and
$384,995$279,728 respectively.
For the year ended December 31,
2019,2022 and 2020, the amount of
$322 was$1,119 and $240 were credited to cost of sales when the circumstances, such as copper price fluctuation, that caused the net realizable value of inventory to be lower than its cost no longer existed.
For the year ended December 31, 2018 and 2017, the2021, our Company recognized allowance for inventory of $1,613 and $532$14,136 as an expense in cost of sales for inventories carried at net realizable value.
F-76
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14. CONTRACT ASSETS
14(a)Assets related to contracts with customers
| As of December 31, | |
| 2019 | | 2018 | |
| US$’000 | | US$’000 | |
Contract assets - current | | 4,686 | | | 1,460 | |
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| US$’000 | | US$’000 |
| Contract assets - current | 12,450 | | | 11,381 | |
There were no advances received or retentions on SDI service contracts during the financial years ended December 31,
20192022 and
2018.2021. As of January 1, 2021, the balance of contract assets amounted to $10,245. The contract assets balance increased as our Company provided more services and transferred more goods ahead of the agreed payment schedules.
Our Company mainly conducts its SDI services contract with customers within public sector, and the expected credit loss on contract assets is close to zero.
14(b)Unsatisfied supply, delivery, and installation (SDI) services contracts
The following table shows the aggregate amount of the transaction price allocated to the unsatisfied performance obligations.
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Unsatisfied long-term SDI contracts | | | | | | Unsatisfied long-term SDI contracts | |
Expected to be recognized as revenue over 3 years | | 156,592 | | | 14,922 | | Expected to be recognized as revenue over 3 years | 109,816 | | | 119,025 | |
F-77
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15.
| PROPERTY, PLANT15. PROPERTY, PLANT AND EQUIPMENT
|
| | Land | | Buildings | | Building improvement | | Machinery and equipment | | Motor vehicle and other asset and assets under finance lease | | Office equipment | | Construction in progress | | Total | | | Land | | Buildings | | Building improvement | | Machinery and equipment | | Motor vehicle
and other asset | | Office
equipment | | Construction in
progress | | Total |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
Cost | | | | | | | | | | | | | | | | | | Cost | |
At January 1, 2018 | | 6,227 | | 48,421 | | 5,622 | | 96,964 | | 5,230 | | 6,959 | | 1,047 | | 170,470 | | |
| At January 1, 2021 | | At January 1, 2021 | 6,872 | | | 52,116 | | | 7,336 | | | 100,265 | | | 5,969 | | | 7,588 | | | 15,661 | | | 195,807 | |
Additions | | — | | 229 | | 76 | | 480 | | 624 | | 395 | | 2,694 | | 4,498 | | Additions | — | | | — | | | 6 | | | 406 | | | 374 | | | 761 | | | 7,109 | | | 8,656 | |
Disposals | | — | | (8 | ) | | — | | (1,120 | ) | | (503 | ) | | (490 | ) | | — | | (2,121 | ) | Disposals | — | | | (37) | | | — | | | (7,232) | | | (517) | | | (474) | | | — | | | (8,260) | |
Transfer | | — | | — | | 3 | | 1,418 | | 505 | | 102 | | (2,028 | ) | | — | | Transfer | — | | | (45) | | | 108 | | | 4,523 | | | 88 | | | 11 | | | (4,642) | | | 43 | |
Exchange differences | | (21 | ) | | (752 | ) | | 14 | | | (1,024 | ) | | (76 | ) | | (244 | ) | | (40 | ) | | (2,143 | ) | Exchange differences | (856) | | | (3,942) | | | (613) | | | (9,798) | | | (438) | | | (339) | | | (1,316) | | | (17,302) | |
At December 31, 2018 | | 6,206 | | | 47,890 | | | 5,715 | | | 96,718 | | | 5,780 | | | 6,722 | | | 1,673 | | | 170,704 | | |
Effects on initial application of IFRS 16 | | — | | | — | | | — | | | — | | | (192 | ) | | — | | | — | | | (192 | ) | |
Adjusted balance at January 1, 2019 | | 6,206 | | | 47,890 | | | 5,715 | | | 96,718 | | | 5,588 | | | 6,722 | | | 1,673 | | | 170,512 | | |
| At December 31, 2021 | | At December 31, 2021 | 6,016 | | | 48,092 | | | 6,837 | | | 88,164 | | | 5,476 | | | 7,547 | | | 16,812 | | | 178,944 | |
Additions | | — | | 7 | | 119 | | 292 | | 433 | | 315 | | 2,240 | | 3,406 | | Additions | — | | | 210 | | | 353 | | | 454 | | | 298 | | | 645 | | | 1,593 | | | 3,553 | |
Disposals | | — | | — | | (4 | ) | | (2,308 | ) | | (524 | ) | | (331 | ) | | — | | (3,167 | ) | Disposals | — | | | — | | | — | | | (3,783) | | | (304) | | | (457) | | | (5) | | | (4,549) | |
Transfer | | — | | (167 | ) | | 746 | | 1,748 | | 180 | | 139 | | (2,582 | ) | | 64 | | Transfer | — | | | 4,038 | | | 1,280 | | | 10,637 | | | — | | | 200 | | | (16,155) | | | — | |
Exchange differences | | 632 | | | 2,813 | | | 454 | | | 7,419 | | | 332 | | | 247 | | | 47 | | | 11,944 | | Exchange differences | (296) | | | (1,753) | | | (272) | | | (4,158) | | | (160) | | | (535) | | | (840) | | | (8,014) | |
At December 31, 2019 | | 6,838 | | | 50,543 | | | 7,030 | | | 103,869 | | | 6,009 | | | 7,092 | | | 1,378 | | | 182,759 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2022 | | At December 31, 2022 | 5,720 | | | 50,587 | | | 8,198 | | | 91,314 | | | 5,310 | | | 7,400 | | | 1,405 | | | 169,934 | |
| Land | | Buildings | | Building improvement | | Machinery and equipment | | Motor vehicle and other asset and assets under finance lease | | Office equipment | | Construction in progress | | Total | | | | | | | | | | | | | | | | | |
Depreciation/Impairment | | | | | | | | | | | | | | | | | | | | | | | | | Depreciation/Impairment | |
At January 1, 2018 | | — | | (33,082 | ) | | (3,254 | ) | | (82,490 | ) | | (3,430 | ) | | (5,888 | ) | | — | | (128,144 | ) | |
| At January 1, 2021 | | At January 1, 2021 | — | | | (38,485) | | | (4,856) | | | (87,544) | | | (3,857) | | | (6,365) | | | — | | | (141,107) | |
Depreciation charge for the year | | — | | (1,164 | ) | | (296 | ) | | (2,435 | ) | | (604 | ) | | (402 | ) | | — | | (4,901 | ) | Depreciation charge for the year | — | | | (993) | | | (403) | | | (2,184) | | | (504) | | | (506) | | | — | | | (4,590) | |
Impairment | | — | | — | | — | | (10 | ) | | — | | (1 | ) | | — | | (11 | ) | Impairment | — | | | — | | | — | | | (5) | | | — | | | (2) | | | — | | | (7) | |
Depreciation on disposals | | — | | 6 | | 0 | | 1,119 | | 503 | | 486 | | — | | 2,114 | | |
| Disposals | | Disposals | — | | | 36 | | | — | | | 7,170 | | | 505 | | | 468 | | | — | | | 8,179 | |
Transfer | | — | | — | | — | | (46 | ) | | — | | 46 | | — | | — | | Transfer | — | | | 45 | | | — | | | — | | | (87) | | | — | | | — | | | (42) | |
Exchange differences | | — | | | 510 | | | (17 | ) | | 914 | | | 49 | | | 200 | | | — | | | 1,656 | | Exchange differences | — | | | 3,389 | | | 428 | | | 8,639 | | | 268 | | | 318 | | | — | | | 13,042 | |
At December 31, 2018 | | — | | | (33,730 | ) | | (3,567 | ) | | (82,948 | ) | | (3,482 | ) | | (5,559 | ) | | — | | | (129,286 | ) | |
Effects on initial application of IFRS 16 | | — | | | — | | | — | | | — | | | 126 | | | — | | | — | | | 126 | | |
Adjusted balance at January 1, 2019 | | — | | | (33,730 | ) | | (3,567 | ) | | (82,948 | ) | | (3,356 | ) | | (5,559 | ) | | — | | | (129,160 | ) | |
| At December 31, 2021 | | At December 31, 2021 | — | | | (36,008) | | | (4,831) | | | (73,924) | | | (3,675) | | | (6,087) | | | — | | | (124,525) | |
Depreciation charge for the year | | — | | (1,044 | ) | | (338 | ) | | (2,391 | ) | | (541 | ) | | (420 | ) | | — | | (4,734 | ) | Depreciation charge for the year | — | | | (1,069) | | | (438) | | | (2,434) | | | (435) | | | (556) | | | — | | | (4,932) | |
Impairment | | — | | — | | (1 | ) | | (550 | ) | | 7 | | (2 | ) | | — | | (546 | ) | Impairment | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Depreciation on disposals | | — | | — | | 4 | | 2,274 | | 477 | | 329 | | — | | 3,084 | | |
| Disposals | | Disposals | — | | | — | | | — | | | 3,783 | | | 242 | | | 452 | | | — | | | 4,477 | |
Transfer | | — | | 265 | | (265 | ) | | — | | (64 | ) | | — | | — | | (64 | ) | Transfer | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Exchange differences | | — | | | (2,361 | ) | | (297 | ) | | (6,517 | ) | | (185 | ) | | (232 | ) | | — | | | (9,592 | ) | Exchange differences | — | | | 1,482 | | | 194 | | | 3,557 | | | 88 | | | 438 | | | — | | | 5,759 | |
At December 31, 2019 | | — | | | (36,870 | ) | | (4,464 | ) | | (90,132 | ) | | (3,662 | ) | | (5,884 | ) | | — | | | (141,012 | ) | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| At December 31, 2022 | | At December 31, 2022 | — | | | (35,595) | | | (5,075) | | | (69,018) | | | (3,780) | | | (5,753) | | | — | | | (119,221) | |
| Land | | Buildings | | Building improvement | | Machinery and equipment | | Motor vehicle and other asset and assets under finance lease | | Office equipment | | Construction in progress | | Total | | | | | | | | | | | | | | | | | |
Net book value | | | | | | | | | | | | | | | | | | | | | | | | | Net book value | |
At December 31, 2019 | | 6,838 | | | 13,673 | | | 2,566 | | | 13,737 | | | 2,347 | | | 1,208 | | | 1,378 | | | 41,747 | | |
At December 31, 2018 | | 6,206 | | | 14,160 | | | 2,148 | | | 13,770 | | | 2,298 | | | 1,163 | | | 1,673 | | | 41,418 | | |
At January 1, 2018 | | 6,227 | | | 15,339 | | | 2,368 | | | 14,474 | | | 1,800 | | | 1,071 | | | 1,047 | | | 42,326 | | |
| At December 31, 2022 | | At December 31, 2022 | 5,720 | | | 14,992 | | | 3,123 | | | 22,296 | | | 1,530 | | | 1,647 | | | 1,405 | | | 50,713 | |
| At December 31, 2021 | | At December 31, 2021 | 6,016 | | | 12,084 | | | 2,006 | | | 14,240 | | | 1,801 | | | 1,460 | | | 16,812 | | | 54,419 | |
| At January 1, 2021 | | At January 1, 2021 | 6,872 | | | 13,631 | | | 2,480 | | | 12,721 | | | 2,112 | | | 1,223 | | | 15,661 | | | 54,700 | |
F-78
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15.
| PROPERTY, PLANT AND EQUIPMENT (continued)
|
15(a)Impairment of property, plant and equipment
In
2019, 20182022, 2021 and
2017 the2020 our Company recorded an impairment loss of
$546, $11$0, $7 and
$223$202 on property, plant and equipment at
Sigma Cable, Shanghai Yayang
Ningbo Pacific and SFO facilities. The impairment is presented within
cost of sales in consolidated income statements, other operating expenses in Note 7(b), and the impairment of property, plant and equipment of
ROW, North Asia and Thailand segments in Note 5.
Our Company identified impairment at Sigma Cable due to lack of profitability. Our Company determined that certain machinery and equipment would not generate the expected future cash flows. The impairment test revealed that the total carrying amount of these assets was greater than their total recoverable amount. After considering the relevant objective evidence, our Company recorded an impairment loss.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
15. PROPERTY, PLANT AND EQUIPMENT (continued)
15(a) Impairment of property, plant and equipment (continued)
Our Company performed a valuation for utilized machinery measured at fair value less costs to sell using a cost approach due to closure of the manufacturing facilities at Shanghai
Yayang and Ningbo Pacific.Yayang. Its fair value measurement was classified as Level 3 of the fair value hierarchy. After considering the relevant evidence, the key assumption used included replacement costs, residual value and remaining useful life of these existing assets. The impairment test revealed that the recoverable amount was lower than the carrying amount.
The
Our Company considers the market demand for SFO’s products and performed an impairment test on the CGU composed of property, plant and equipment used in the manufacturing of fiber optic cables at SFO.
TheOur Company determined the recoverable amount of the CGU to be $0 based on the value in use.
The key assumptions used in calculating the value in use included the revenue growth and a discount rate of 14.8%. 15(b)
Financial leases under property, plant and equipmentThe carrying value of motor vehicles under financial leases as of December 31, 2019, 2018 and 2017 were $0, $66 and $50, respectively. These assets under financial lease are pledged for financial lease liabilities (Note 25(b)).
On January 1, 2019, the Company reclassified “Lease assets” from “Property, plant and equipment” to “right-of-use assets” upon adoption of IFRS 16. See the Note 4.1.
15(c)Pledge
Information about the property, plant and equipment that were pledged to others as collaterals is provided in Note 27(e) (i).
F-79
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. RIGHT-OF-USE ASSETS
16(a)Amounts recognized in the consolidated balance sheets
| | As of December 31,
| |
| | 2019
| |
Right-of-use assets
| | US$’000
| |
Land
| | | 3,029
| |
Buildings
| | | 546
| |
Motor vehicle and other asset
| | | 58
| |
Office equipment
| | | 102
| |
| | | 3,735
| |
| | | | | | | | | | | |
| As of December 31, | | As of December 31, |
| 2022 | | 2021 |
| Right of use assets | US$’000 | | US$’000 |
| Land | 2,211 | | | 2,533 | |
| Buildings | 935 | | | 690 | |
| Motor vehicle and other asset | 134 | | | 135 | |
| Office equipment | 152 | | | 35 | |
| 3,432 | | | 3,393 | |
The
Our Company leases various assets including land, buildings, business vehicles and multifunction printers. Rental contracts are typically made for periods of
12 to
3637 years. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose covenants, but leased assets may not be used as security for borrowing purposes.
Additions to the right-of-use assets during the 20192022 financial year were $473.$863 (2021
: $906).
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16. RIGHT-OF-USE ASSETS (continued)
16(b)Amounts recognized in the consolidated income statements
| | 2019
| |
Depreciation charge of right-of-use assets
| | US$’000
| |
Land
| | | 211
| |
Buildings
| | | 233
| |
Motor vehicle and other asset
| | | 38
| |
Office equipment
| | | 25
| |
| | | 507
| |
| | | | |
Interest expenses (included in finance cost)
| | | 91
| |
Expenses relating to short-term leases
| | | 159
| |
Expenses relating to lease of low-value assets that are not short-term leases
| | | 15
| |
| | | | | | | | | | | |
| 2022 | | 2021 |
| Depreciation charge of right of use assets | US$’000 | | US$’000 |
| Land | 242 | | | 289 | |
| Buildings | 337 | | | 286 | |
| Motor vehicle and other asset | 65 | | | 53 | |
| Office equipment | 38 | | | 33 | |
| 682 | | | 661 | |
| | | |
| Interest expenses (included in finance cost) | 80 | | | 70 | |
| Expenses relating to short-term leases | 11 | | | 3 | |
| Expenses relating to lease of low-value assets that are not short-term leases | 3 | | | 3 | |
The total cash outflow for lease in 20192022 was $691.F-80
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
$710 (2021: $708). 16.
| RIGHT-OF-USE ASSETS (continued)
|
16(c)Prepaid land lease payments
| | 2018
| |
| | US$’000
| |
Carrying amount as of January 1,
| | | 1,103
| |
Recognized lease expense during the year
| | | (38
| )
|
Exchange difference
| | | (53
| )
|
Carrying amount as of December 31,
| | | 1,012
| |
Current portion included in prepayments
| | | 34
| |
Non-current portion included in prepaid land lease
payments
| | | 978
| |
17. INVESTMENT PROPERTIESThe property land is situated in Mainland China and is held under a long-term operating lease for 50 years.
Information about the prepaid land lease payments that were pledged to others as collaterals is provided in Note 27(e)(i).
17(a)Net book value of investment properties
| Land not being used for operation | | Office buildings for rent | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| US$’000 | | US$’000 | | US$’000 | | | Land not being
used for
operation | | Office buildings
for rent | | Warehouse | | Land leasehold right | | Other | | Total |
As of December 31, 2019 | | | | | | | | |
| | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| As of December 31, 2022 | | As of December 31, 2022 | |
Cost | | 467 | | 716 | | 1,183 | | Cost | 403 | | | 515 | | | 5,018 | | | 91 | | | 11 | | | 6,038 | |
Less: Accumulated depreciation | | — | | | (453 | ) | | (453 | ) | Less: Accumulated depreciation | — | | | (385) | | | (397) | | | (5) | | | (1) | | | (788) | |
Net book value | | 467 | | | 263 | | | 730 | | Net book value | 403 | | | 130 | | | 4,621 | | | 86 | | | 10 | | | 5,250 | |
| | As of December 31, 2021 | | As of December 31, 2021 | | | |
| Cost | | Cost | 418 | | | 716 | | | 5,366 | | | 98 | | | — | | | 6,598 | |
| Less: Accumulated depreciation | | Less: Accumulated depreciation | — | | | (516) | | | (270) | | | (3) | | | — | | | (789) | |
| Net book value | | Net book value | 418 | | | 200 | | | 5,096 | | | 95 | | | — | | | 5,809 | |
| Land not being used for operation | | Office buildings for rent | | Total | |
| US$’000 | | US$’000 | | US$’000 | |
As of December 31, 2018 | | | | | | | | | |
Cost | | 430 | | | 695 | | | 1,125 | |
Less: Accumulated depreciation | | — | | | (405 | ) | | (405 | ) |
Net book value | | 430 | | | 290 | | | 720 | |
F-81
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17.
| INVESTMENT PROPERTIES (continued)
|
17(a)Net book value of investment properties (continued)
A reconciliation of the net book value of investment properties was as follow:
| | 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Net book value at January 1 | | 720 | | 763 | | Net book value at January 1 | 5,809 | | | 6,378 | |
| Addition | | Addition | 12 | | | — | |
| Disposals | | Disposals | (30) | | | — | |
Depreciation (included in administrative expenses) | | (33 | ) | | (35 | ) | Depreciation (included in administrative expenses) | (176) | | | (196) | |
Exchange difference | | 43 | | | (8 | ) | Exchange difference | (365) | | | (373) | |
Net book value at December 31 | | 730 | | | 720 | | Net book value at December 31 | 5,250 | | | 5,809 | |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17. INVESTMENT PROPERTIES (continued)
17(b)The amount recognized in profit
or loss arising from the investment properties
| 2019 | | 2018 | | 2017 | |
| US$’000 | | US$’000 | | US$’000 | |
Rental income derived from investment properties | | 78 | | | 84 | | | 68 | |
Direct operating expenses (including repairs and maintenance) generating rental income | | (1 | ) | | (1 | ) | | (1 | ) |
Direct operating expenses (including repairs and maintenance) that did not generate rental income | | — | | | — | | | (1 | ) |
Net profit arising from investment properties carried at cost | | 77 | | | 83 | | | 66 | |
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 |
| Rental income derived from investment properties | 243 | | | 170 | | | 190 | |
| Direct operating expenses (including repairs and maintenance) generating rental income | (157) | | | (174) | | | (145) | |
| Direct operating expenses (including repairs and maintenance) that did not generate rental income | (21) | | | (23) | | | — | |
| Net profit (loss) arising from investment properties carried at cost | 65 | | | (27) | | | 45 | |
Undiscounted lease payments receivable to be received during the lease terms are immaterial.
17(c)Measuring investment properties at fair value
The fair value of the investment properties are stated below:
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Land not being used for operation | | 11,566 | | 10,656 | | Land not being used for operation | 10,322 | | | 10,528 | |
Office buildings for rent | | 1,460 | | 1,397 | | Office buildings for rent | 1,995 | | | 2,444 | |
| Warehouse | | Warehouse | 5,291 | | | 5,658 | |
| Land leasehold right | | Land leasehold right | 158 | | | 173 | |
| Other | | Other | 11 | | | — | |
The fair value of aforementioned investment properties have been determined based on the valuation and is considered a level 3 measurement. The valuation has been made on the assumption to sell the property interests in the open market in the neighborhood without the benefit of any deferred term contract, leaseback, joint venture, management agreement or any similar arrangement, which would serve to increase the value of the property interests. The valuation adopted market comparison approach to estimate the fair market value of the properties. Under the market comparison approach, the appraisal is based on recent sales and listings of comparable property. Adjustments were made for differences between the subject property and those actual sales and listings regarded as comparable. The factors which used for considering the property valuation include the significant unobservable inputs, such as location, transportation, land uses, facilities, neighboring area, land characteristics, potential, regulations and liquidity.
Information about the investment properties that were pledged to others as collaterals is provided in Note 27(e) (i).
F-82
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18.
| INTANGIBLE18. INTANGIBLE ASSETS
|
| | 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Cost | | | | | | Cost | |
At January 1 | | 586 | | 526 | | At January 1 | 696 | | | 743 | |
Addition | | 20 | | 67 | | Addition | 62 | | | 4 | |
| Disposals | | Disposals | — | | | (19) | |
| Transfer | | Transfer | — | | | — | |
Exchange difference | | 15 | | | (7 | ) | Exchange difference | (20) | | | (32) | |
At December 31 | | 621 | | | 586 | | At December 31 | 738 | | | 696 | |
Accumulated amortization | | | | | | | Accumulated amortization | | | |
At January 1 | | (429 | ) | | (388 | ) | At January 1 | (567) | | | (563) | |
Amortization | | (50 | ) | | (44 | ) | Amortization | (45) | | | (47) | |
| Disposals | | Disposals | — | | | 19 | |
Exchange difference | | (14 | ) | | 3 | | Exchange difference | 13 | | | 24 | |
At December 31 | | (493 | ) | | (429 | ) | |
| At Current period end | | At Current period end | (599) | | | (567) | |
Net book value | | | | | | | Net book value | | | |
At December 31 | | 128 | | | 157 | | At December 31 | 139 | | | 129 | |
19.
| INVESTMENTS IN ASSOCIATES
|
19. INVESTMENTS IN ASSOCIATES
19(a)Associates Associates of theour Company
| | | | Percentage of equity interest | | | Percentage of
equity interest |
| | | As of December 31 | | | As of December 31 |
Company Name | Nature of business | Country of incorporation | 2019 | | 2018 | | Company Name | Nature of business | Country of
incorporation | 2022 | | 2021 |
Shandong Pacific Rubber Cable Co., Ltd. (“SPRC”) | Manufacturing of rubber cable | PRC | 25.00% | | 25.00% | | Shandong Pacific Rubber Cable Co., Ltd. (“SPRC”) | Manufacturing of rubber cable | PRC | 25.00% | | 25.00% |
Siam Pacific Holding Company Limited (“SPHC”) | Investment & holding company | Thailand | 49.00% | | 49.00% | | Siam Pacific Holding Company Limited (“SPHC”) | Investment & holding company | Thailand | 49.00% | | 49.00% |
Loxpac (Thailand) Company Limited (“Loxpac”) (Formerly known as “Loxley Pacific Co., Ltd.) | Providing telecommunication service | Thailand | 21.39% | | 21.39% | | Loxpac (Thailand) Company Limited (“Loxpac”) (Formerly known as “Loxley Pacific Co., Ltd.) | Providing telecommunication service | Thailand | 21.39% | | 21.39% |
Loxpac Hong Kong Co., Limited (“Loxpac HK”) (Formerly known as “Loxley Pacific Hong Kong Co., Limited” ) | Investment & holding company | Hong Kong | 23.10% | | 23.10% | | Loxpac Hong Kong Co., Limited (“Loxpac HK”) (Formerly known as “Loxley Pacific Hong Kong Co., Limited” ) | Investment & holding company | Hong Kong | 23.10% | | 23.10% |
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19. INVESTMENTS IN ASSOCIATES (continued)
19(b)
Carrying amounts of investment in associates | | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
At January 1 | | 864 | | 861 | | At January 1 | 835 | | | 930 | |
Share of loss of associates | | (3 | ) | | (3 | ) | Share of loss of associates | (1) | | | (1) | |
Exchange difference | | 74 | | | 6 | | Exchange difference | (29) | | | (94) | |
At December 31 | | 935 | | | 864 | | At December 31 | 805 | | | 835 | |
The investments in SPRC, Loxpac and Loxpac HK have been fully impaired.
F-83
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
19.
| INVESTMENTS IN ASSOCIATES
|
19(c)Summarized financial information for associates
The following table summarized financial information of theour Company’s investments in associates:
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Summarized financial information of SPHC: | | | | | | Summarized financial information of SPHC: | |
Current assets | | 3 | | 9 | | Current assets | 1 | | | 3 | |
Non-current assets | | 2,103 | | 1,938 | | Non-current assets | 1,818 | | | 1,884 | |
Current liabilities | | (3 | ) | | (3 | ) | Current liabilities | (2) | | | (1) | |
Non-current liabilities | | (196 | ) | | (181 | ) | Non-current liabilities | (176) | | | (182) | |
Equity | | 1,907 | | | 1,763 | | Equity | 1,641 | | | 1,704 | |
| | | | | | | | | | |
Reconciliation to the Company’s investments in associates: | | | | | | |
| Reconciliation to our Company’s investments in associates: | | Reconciliation to our Company’s investments in associates: | |
Percentage of equity interest | 49% | | 49% | | Percentage of equity interest | 49% | | 49% |
Carrying amount of the investment | | 935 | | | 864 | | Carrying amount of the investment | 805 | | | 835 | |
| | For the year ended December 31, | | | For the year ended Current period end |
| 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Summarized financial information of SPHC: | | | | | | | | Summarized financial information of SPHC: | |
Revenue | | — | | | — | | | — | | Revenue | — | | | — | | | — | |
Loss for the year | | (6 | ) | | (5 | ) | | (5 | ) | Loss for the year | (3) | | | (2) | | | (2) | |
| | | | | | | | | | | | | | | |
Reconciliation to the Company’s investments in associates: | | | | | | | | |
| Reconciliation to our Company’s investments in associates: | | Reconciliation to our Company’s investments in associates: | |
Percentage of equity interest | 49% | | 49% | | 49% | | Percentage of equity interest | 49% | | 49% | | 49% |
Share of the associates’ profit for the year: | | (3 | ) | | (3 | ) | | (3 | ) | |
| Share of the associates’ loss for the year: | | Share of the associates’ loss for the year: | (1) | | | (1) | | | (1) | |
As of December 31,
20192022 and
2018, the2021, our Company's associates had no contingent liabilities or capital commitments.
F-84
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20.
| 20. TRADE AND OTHER PAYABLES |
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Trade payables | | 10,509 | | 15,941 | | Trade payables | 29,258 | | | 32,428 | |
Other payables | | 6,370 | | | 5,186 | | Other payables | 10,633 | | | 12,356 | |
| | 16,879 | | | 21,127 | | | 39,891 | | | 44,784 | |
Other payables included refund liabilities arising from contracts with customers, which amounted to
$4,393$8,667 and
$3,831$9,832 as of December 31,
20192022 and
2018,2021, respectively.
| As of December 31, | |
| 2019 | | 2018 | |
| Current | | Non-current | | Total | | Current | | Non-current | | Total | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Employee benefit liabilities | | | | | | | | | | | | | | | | | | |
Pension-Defined benefit plans | | 1,436 | | | 10,306 | | | 11,742 | | | 855 | | | 8,161 | | | 9,016 | |
Long service leave | | 452 | | | 128 | | | 580 | | | 427 | | | 112 | | | 539 | |
Total | | 1,888 | | | 10,434 | | | 12,322 | | | 1,282 | | | 8,273 | | | 9,555 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| Current | | Non-current | | Total | | Current | | Non-current | | Total |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Employee benefit liabilities | | | | | | | | | | | |
| Pension-Defined benefit plans | 1,320 | | | 7,576 | | | 8,896 | | | 1,387 | | | 8,467 | | | 9,854 | |
| Long service leave | 627 | | | 117 | | | 744 | | | 600 | | | 126 | | | 726 | |
| Total | 1,947 | | | 7,693 | | | 9,640 | | | 1,987 | | | 8,593 | | | 10,580 | |
21(a)Pension – Defined contribution plans
The
Our Company has several defined contribution plans covering its employees in Australia, PRC, Singapore, Thailand, and Taiwan. Contributions to the plan are made monthly. Total charges for the years ended December 31,
2019, 20182022, 2021 and
2017,2020, were
$1,160, $1,264,$1,182, $1,200, and
$1,280,$966, respectively.
21(b)
Pension – Defined benefit plansThe defined benefit liability recognized in the consolidated balance sheet in respect to defined benefit plans is the present value of the defined benefit obligation at the end of the reporting period, together with adjustments for past service costs and actuarial gains or losses. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using future actuarial assumptions about demographic and financial variables that affect the determination of the amount of such benefits.
In accordance with the Thailand labor law, Charoong Thai and its subsidiaries are obliged to make payment to retiring employees, at rates of 1 to 13 times of their final month’s salary rate, depending on the length of service. In addition, Charoong Thai also has the extra benefit plan to make payment to qualified retiring employees, at rates of 1 to 26 times of final month's salary. The plan is not funded.
TheOur Company pays to settle the obligations as and when employees retire.
F-85
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21.
| 21. EMPLOYEE BENEFIT (continued) |
21(b)
Pension – Defined benefit plans (continued)
The following tables summaries the components of net benefit expense recognized in the income statement and the funded status and amounts recognized in the consolidated balance sheet for the plan:
| | For the year ended December 31, | | | For the year ended December 31, |
Net benefit cost | 2019 | | 2018 | | 2017 | | Net benefit cost | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Current service cost | | 546 | | 419 | | 360 | | Current service cost | 447 | | | 519 | | | 562 | |
Past service cost | | 121 | | — | | — | | Past service cost | 48 | | | — | | | — | |
Interest cost on benefit obligation | | 254 | | | 202 | | | 210 | | Interest cost on benefit obligation | 154 | | | 127 | | | 147 | |
Net benefit cost | | 921 | | | 621 | | | 570 | | Net benefit cost | 649 | | | 646 | | | 709 | |
| | For the year ended December 31, | | | For the year ended December 31, |
Other comprehensive income | 2019 | | 2018 | | 2017 | | Other comprehensive income | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Actuarial (gain) / loss – experience | | 494 | | 396 | | 251 | | Actuarial (gain) / loss – experience | (263) | | | 140 | | | (328) | |
Actuarial (gain) / loss – demographic assumption | | 18 | | 1 | | 184 | | |
| Actuarial loss / (gain) – demographic assumption | | Actuarial loss / (gain) – demographic assumption | 74 | | | (23) | | | (1) | |
Actuarial (gain) / loss – financial assumption | | 1,215 | | | 13 | | | 337 | | Actuarial (gain) / loss – financial assumption | (543) | | | (676) | | | 130 | |
Actuarial loss | | 1,727 | | | 410 | | | 772 | | |
| Actuarial gain | | Actuarial gain | (732) | | | (559) | | | (199) | |
| | For the year ended December 31, | | | For the year ended December 31, |
Change in the defined obligation | 2019 | | 2018 | | 2017 | | Change in the defined obligation | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Defined benefit obligation at January 1 | | 9,016 | | 8,293 | | 6,652 | | Defined benefit obligation at January 1 | 9,854 | | | 11,300 | | | 11,742 | |
Current service cost | | 546 | | 419 | | 360 | | Current service cost | 447 | | | 519 | | | 562 | |
Past service cost | | 121 | | — | | — | | Past service cost | 48 | | | — | | | — | |
Interest cost on benefit obligation | | 254 | | 202 | | 210 | | Interest cost on benefit obligation | 154 | | | 127 | | | 147 | |
Benefits paid directly by the Company | | (535 | ) | | (352 | ) | | (274 | ) | |
Actuarial loss in other comprehensive income | | 1,727 | | 410 | | 772 | | |
| Benefits paid directly by our Company | | Benefits paid directly by our Company | (653) | | | (746) | | | (954) | |
| Actuarial gain in other comprehensive income | | Actuarial gain in other comprehensive income | (732) | | | (559) | | | (199) | |
Exchange differences | | 613 | | | 44 | | | 573 | | Exchange differences | (222) | | | (787) | | | 2 | |
Defined benefit obligation at December 31 | | 11,742 | | | 9,016 | | | 8,293 | | Defined benefit obligation at December 31 | 8,896 | | | 9,854 | | | 11,300 | |
The significant assumptions used in determining the actuarial present value of the defined benefit obligations for the year ended December 31, 20192022 and 20182021 are as follows:
| | 2019 | | | 2018 | | 2022 | | 2021 |
| % | | | % | | % | | % |
Discount rate | | 1.5 | | | 2.6 ~ 2.7 | Discount rate | 2.5-2.7 | | 1.9 |
Rate of salary increase | 5.0~6.0 | | | 5.0 ~ 6.0 | Rate of salary increase | 5.0~6.0 | | 5.0~6.0 |
Pre-retirement mortality | * Thailand TMO17 Tables | | | * Thailand TMO17 Tables | Pre-retirement mortality | * Thailand TMO17 Tables | | * Thailand TMO17 Tables |
* TMO represented as Thailand Mortality Ordinary Tables | |
F-86
*TMO represented as Thailand Mortality Ordinary Tables
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21.
| 21. EMPLOYEE BENEFIT (continued) |
21(b)
Pension – Defined benefit plans (continued)Maturity profile of defined benefit obligation
The following pension benefit payments are expected payments to be made in the future years out of the defined benefit plan obligation:
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Within the next 12 months (next annual reporting period) | | 1,340 | | 855 | | Within the next 12 months (next annual reporting period) | 1,320 | | | 1,387 | |
Between 2 and 5 years | | 2,489 | | 2,374 | | Between 2 and 5 years | 1,936 | | | 1,770 | |
Between 6 and 10 years | | 4,391 | | 4,187 | | Between 6 and 10 years | 4,101 | | | 4,345 | |
Beyond 10 years | | 16,917 | | | 17,084 | | |
Total expected payments | | 25,137 | | | 24,500 | | Total expected payments | 7,357 | | | 7,502 | |
| | | | | | | | | | |
Weighted average duration of defined benefit obligation | 9 years | | 10 - 11 years | | Weighted average duration of defined benefit obligation | 9 years | | 9 years |
A one-percentage point change in the assumed rates would have yielded the following effects:
| | 2019 | | 2018 | | | 2022 | 2021 |
| US$’000 | | US$’000 | | | US$’000 |
Discount rate – 1% increase | | (1,003 | ) | | (777 | ) | Discount rate – 1% increase | (699) | | (817) | |
Discount rate – 1% decrease | | 1,178 | | 908 | | Discount rate – 1% decrease | 818 | | 960 | |
Rate of salary increase – 1% increase | | 1,115 | | 869 | | Rate of salary increase – 1% increase | 782 | | 912 | |
Rate of salary increase – 1% decrease | | (973 | ) | | (762 | ) | Rate of salary increase – 1% decrease | (685) | | (796) | |
The sensitivity result above determines their individual impact on the plan’s year-end defined benefit obligation. In reality, the plan is subject to multiple external experience items which may move the defined benefit obligation in similar or opposite directions, while the plan’s sensitivity to such changes can vary over time.
| 21(c)
| 21(c) Long service leave |
The liability for long service leave is recognized in the provision for employee benefits and measured as present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bond with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows. As of December 31,
20192022 and
2018,2021, the amount of long service leave obligation was
$580$744 and
$539,$726, respectively.
F-87
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22.
| OTHER CURRENT LIABILITIES
|
| As of December 31, | |
| 2019 | | 2018 | |
| US$’000 | | US$’000 | |
Contract liabilities | | 216 | | | 756 | |
Dividend payable | | 674 | | | 565 | |
Deferred government grant | | — | | | 318 | |
Onerous contracts provisions | | 238 | | | 42 | |
Other current liabilities | | 1,228 | | | 1,591 | |
Total | | 2,356 | | | 3,272 | |
The Company was subject to two expropriations by the PRC government in 2018. The government grant related to the completed appropriation, amounted to $106, is recognized as other income for the year ended December 31, 2018. The government grant for the expropriation in progress, amounted to $318, is recognized as other current liabilities as of December 31, 2018, and as other income for the year ended December 31, 2019.
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| US$’000 | | US$’000 |
| Contract liabilities | 1,325 | | | 612 | |
| Dividend payable | 291 | | | 671 | |
| Onerous contracts provisions | 2,110 | | | 9,640 | |
| Other current liabilities | 1,563 | | | 3,212 | |
| Total | 5,289 | | | 14,135 | |
Other current liabilities include undue value added tax, unpaid withholding tax, and other miscellaneous liabilities.
22(a)Onerous contracts provisions
| | | | For the year ended December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
At January 1 | | 42 | | 555 | | At January 1 | 9,640 | | | 5,105 | |
Recognized | | 218 | | 37 | | Recognized | 498 | | | 6,241 | |
Reversed | | (25 | ) | | (544 | ) | Reversed | (7,763) | | | (1,401) | |
Exchange differences | | 3 | | | (6 | ) | Exchange differences | (265) | | | (305) | |
At December 31 | | 238 | | | 42 | | At December 31 | 2,110 | | | 9,640 | |
22(b)Contract Liabilities
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 | | 2020 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Current contract liabilities | | | | | | Current contract liabilities | |
Advance from customers | | 93 | | 668 | | Advance from customers | 1,222 | | | 511 | | | 156 | |
Custodial service | | 63 | | 71 | | Custodial service | 47 | | | 50 | | | 44 | |
Transportation service | | 60 | | | 17 | | Transportation service | 56 | | | 51 | | | 59 | |
Total current contract liabilities | | 216 | | | 756 | | Total current contract liabilities | 1,325 | | | 612 | | | 259 | |
The
Our Company
applied IFRS 15 from January 1, 2018 and recognizedrecognizes contract liabilities when
considerationsit receives advance payments from customers
hadbefore performance obligations have been
received or due before the Company satisfied the performance obligations.
F-88
performed.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22.
| 22. OTHER CURRENT LIABILITIES (continued) |
22(b)
Contract Liabilities (continued)
Revenue recognized in relation to contract liabilities
| | For the year ended December 31, | | | For the year ended December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Revenue recognized that was included in the contract liabilities balance at the beginning of the year | | | | | | Revenue recognized that was included in the contract liabilities balance at the beginning of the year | |
Advance from customers | | 668 | | — | | Advance from customers | 511 | | | 156 | |
Custodial service | | 59 | | 85 | | Custodial service | 49 | | | 40 | |
Transportation service | | 17 | | | 28 | | Transportation service | 49 | | | 44 | |
| | 744 | | | 113 | | | 609 | | | 240 | |
23. EQUITY
23(a)Common shares
| | | As of December 31, | | | As of December 31, |
| | 2019 | | 2018 | | | 2022 | | 2021 |
Authorized shares | | Number of shares | | Number of shares | | Authorized shares | Number of shares | | Number of shares |
Common shares of US$0.01 each | | | 50,000,000 | | 50,000,000 | | Common shares of US$0.01 each | 50,000,000 | | 50,000,000 |
Common shares issued and fully paid | | Number of shares | | US$’000 | |
At December 31, 2019 | | | 13,830,769 | | | 138 | |
At December 31, 2018 | | | 13,830,769 | | | 138 | |
At January 1, 2018 | | | 13,830,769 | | | 138 | |
| | | | | | | | | | | |
| Common shares issued and fully paid | Number of shares | | US$’000 |
| At January 1, 2021 | 13,830,769 | | 138 | |
| At December 31, 2021 | 13,830,769 | | 138 | |
| Issuance of common shares | 6,796,558 | | 68 | |
| At December 31, 2022 | 20,627,327 | | 206 | |
| | | | | | | | | | | |
| Treasury shares | Number of shares | | US$’000 |
| At January 1, 2021 | 11,100 | | 38 | |
| At December 31, 2021 | 11,100 | | 38 | |
| At December 31, 2022 | 11,100 | | 38 | |
APWC announced the completion of the rights offering on February 2, 2022, which was issued and sold an aggregate of 6,796,558 common shares pursuant to the exercise of subscription rights, raising net proceeds of $7.9 million after deducting offering expenses. Following the completion of the rights offering, APWC had 20,627,327 common shares issued and 11,100 common shares were repurchased and held by the Company as treasury shares.
On November 11, 2016, the CompanyAPWC announced that the Board of Directors approved the implementation of a dividend policy as part of the Company'sAPWC's ongoing commitment to increasing shareholder value and return on investment. Pursuant to the dividend policy, subject to review and approval by the Board of Directors, the CompanyAPWC may pay cash dividends of at least 25% of its net post-tax audited consolidated profits attributable to shareholders. As APWC is a holding company, its ability to pay dividends is dependent upon distributions that it receives from its operating subsidiaries and affiliates, which are subject to a number of factors including operating results, capital requirements, expansion
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
23. EQUITY (continued)
plans, debt covenants, business prospects, consideration for non-recurring items and other factors that are deemed relevant from time to time by the respective boards of our subsidiaries and affiliates. The dividend policy will be reviewed on an ongoing basis and updated at the discretion of the Board of Directors as business circumstances and available capital and capital requirements may change.
The Company recognized
APWC did not declare or pay dividends distributed to owners
amounting to $nil ($nil per share), $1,106 ($0.08 per share) and $1,382 ($0.1 per share) for the years ended December 31,
2019, 20182022, 2021 and
2017, respectively.F-89
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2020. 23(c)Other comprehensivecomprehensive income – net of tax
The disaggregation of changes of other comprehensive income by each type of reserve in equity is shown below:
| | For the year ended December 31, 2019 | |
| | Remeasurement of defined benefit plans | | Financial assets at FVOCI reserve | | Foreign currency translation reserve | | Total | |
| | US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Exchange difference on translation of foreign operations | | | — | | | — | | | 10,677 | | | 10,677 | |
Re-measuring losses on defined benefit plans | | | (1,382 | ) | | — | | | — | | | (1,382 | ) |
Changes in faire value of financial assets at fair value through other comprehensive income | | | — | | | 1,336 | | | — | | | 1,336 | |
| | | (1,382 | ) | | 1,336 | | | 10,677 | | | 10,631 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| For the year ended December 31, 2022 |
| Remeasurement
of defined
benefit plans | | Financial
assets at
FVOCI
reserve | | Foreign
currency
translation
reserve | | Total |
| US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Exchange difference on translation of foreign operations | — | | | — | | | (9,506) | | | (9,506) | |
| Re-measuring gains on defined benefit plans | 585 | | | — | | | — | | | 585 | |
| Changes in fair value of financial assets at fair value through other comprehensive income | — | | | (1,082) | | | — | | | (1,082) | |
| 585 | | | (1,082) | | | (9,506) | | | (10,003) | |
| | For the year ended December 31, 2018 | |
| | Remeasurement of defined benefit plans | | Available-for-sale reserve | | Financial assets at FVOCI reserve | | Foreign currency translation reserve | | Total | |
| | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Reclassification of application of IFRS 9 | | | — | | | (1,717 | ) | | 1,717 | | | — | | | — | |
Exchange difference on translation of foreign operations | | | — | | | — | | | — | | | (4,388 | ) | | (4,388 | ) |
Re-measuring losses on defined benefit plans | | | (328 | ) | | — | | | — | | | — | | | (328 | ) |
Changes in faire value of financial assets at fair value through other comprehensive income | | | — | | | — | | | (335 | ) | | — | | | (335 | ) |
| | | (328 | ) | | (1,717 | ) | | 1,382 | | | (4,388 | ) | | (5,051 | ) |
| | | | | | | | | | | | | | | | | | | | | | | |
| For the year ended December 31, 2021 |
| Remeasurement
of defined
benefit plans | | Financial
assets at
FVOCI
reserve | | Foreign
currency
translation
reserve | | Total |
| US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Exchange difference on translation of foreign operations | — | | | — | | | (15,028) | | | (15,028) | |
| Re-measuring gains on defined benefit plans | 447 | | | — | | | — | | | 447 | |
| Changes in fair value of financial assets at fair value through other comprehensive income | — | | | 587 | | | — | | | 587 | |
| 447 | | | 587 | | | (15,028) | | | (13,994) | |
| | | For the year ended December 31, 2017 | | | For the year ended December 31, 2020 |
| | Remeasurement of defined benefit plans | | Available-for-sale reserve | | Foreign currency translation reserve | | Total | | | Remeasurement
of defined
benefit plans | | Financial
assets at
FVOCI
reserve | | Foreign
currency
translation
reserve | | Total |
| | US$’000 | | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
Exchange difference on translation of foreign operations | | | — | | — | | 15,882 | | 15,882 | | Exchange difference on translation of foreign operations | — | | | — | | | 5,211 | | | 5,211 | |
Cumulative translation differences reclassified to profit or loss on liquidation of a subsidiary | | | — | | — | | 248 | | 248 | | |
Re-measuring losses on defined benefit plans | | | (618 | ) | | — | | — | | (618 | ) | Re-measuring losses on defined benefit plans | 159 | | | — | | | — | | | 159 | |
Net loss on available-for-sale financial assets | | | — | | | (64 | ) | | — | | | (64 | ) | |
| Changes in fair value of financial assets at fair value through other comprehensive income | | Changes in fair value of financial assets at fair value through other comprehensive income | — | | | (1,431) | | | — | | | (1,431) | |
| | | (618 | ) | | (64 | ) | | 16,130 | | | 15,448 | | | 159 | | | (1,431) | | | 5,211 | | | 3,939 | |
F-90
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24.
| 24. RELATED PARTY TRANSACTIONS |
The related parties are defined as affiliates of
theour Company; entities for which investments are accounted for by the equity method by
theour Company; the principal owners of
theour Company; its management; members of the immediate families of the principal owners of
theour Company and its management.
Moon View Venture Limited (“Moon View”), PEWC, Singapore Branch, PEWC Singapore Co. (Pte) Ltd.,
Taiwan Submarine Cable Co., Ltd, and PEWC (HK) are controlled by PEWC. Moon View is the immediate holding company of
theour Company. Italian-Thai Development Public Company Limited (“Italian-Thai”) is the non-controlling shareholder of one of
theour Company’s operating subsidiaries in Thailand. SPHC is one of
theour Company’s equity investees. Fujikura Limited is a non-controlling shareholder of one of
theour Company’s operating subsidiaries in Thailand.
24(a)Outstanding balance with related parties
The following table provided the total amount of outstanding balance at December 31, 20192022 and 2018.2021.
| | Amounts due from related parties | | Amounts due to related parties | |
| | As of December 31, | | As of December 31, | |
| | 2019 | | 2018 | | 2019 | | 2018 | |
| | US$’000 | | US$’000 | | US$’000 | | US$’000 | |
The ultimate parent company | | | | | | | | | | | | | |
PEWC | | | — | | | — | | | 862 | | | 45 | |
PEWC, Singapore Branch | | | 21 | | | 15 | | | — | | | — | |
PEWC Singapore Co. (Pte) Ltd. | | | — | | | — | | | 1,027 | | | 1,005 | |
PEWC (HK) | | | 5,247 | | | 5,989 | | | 20 | | | 399 | |
| | | | | | | | | | | | | |
Associate | | | | | | | | | | | | | |
SPHC | | | 196 | | | 181 | | | 1,362 | | | 1,362 | |
| | | | | | | | | | | | | |
Non-controlling shareholder of subsidiary | | | | | | | | | | | | | |
Italian-Thai and its affiliates | | | 6,102 | | | 5,876 | | | — | | | — | |
Fujikura Limited | | | — | | | — | | | — | | | 136 | |
| | | | | | | | | | | | | |
Others | | | — | | | — | | | 13 | | | 50 | |
Total | | | 11,566 | | | 12,061 | | | 3,284 | | | 2,997 | |
| | | | | | | | | | | | | | |
| | As of December 31, |
| | 2022 | | 2021 |
| | US$’000 | | US$’000 |
| Amounts due from related parties | | | | |
| The ultimate parent company | PEWC | 147 | | | 24 | |
| PEWC, Singapore Branch | 5 | | | 21 | |
| PEWC (HK) | 4,177 | | | 7,204 | |
| Taiwan Submarine Cable Co., Ltd | 65 | | | — | |
| | | | |
| Associate | SPHC | 170 | | | 176 | |
| | | | |
| Non-controlling shareholder of subsidiary | Italian-Thai and its affiliates | 6,454 | | | 6,540 | |
| | 11,018 | | | 13,965 | |
| Amounts due to related parties | | | | |
| The ultimate parent company | PEWC | 14,814 | | | 10,075 | |
| PEWC Singapore Co. (Pte) Ltd. | 400 | | | 400 | |
| PEWC (HK) | 26 | | | 16 | |
| | | | |
| Associate | SPHC | 1,362 | | | 1,362 | |
| | | | |
| Others | | 11 | | | 12 | |
| | 16,613 | | | 11,865 | |
| Contract liabilities | | | | |
| The ultimate parent company | PEWC | 137 | | | — | |
| | | | |
As
On July 10, 2020, APWC entered into a secured loan agreement with PEWC as lender. In August 2020, we borrowed the principal amount of December 31, 2019 and 2018,$6 million under the Secured Loan from PEWC, pledging our Company’s 98.3% ownership stake in Sigma Cable as collateral.This loan was a straight loan with a fixed interest rates on the balance duerate of 3% per annum. In June 2021, such loan was repaid in full to PEWC, Singapore Co., (Pte) Ltd. range from 3.09% to 3.79% and 2.70% to 3.40%, respectively, and the payables are repayable upon demand. All balances with related parties are unsecured. .
F-91
facility was terminated.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24.
| 24. RELATED PARTY TRANSACTIONS (continued) |
24(b)Transactions with related parties
The transactions undertaken with related parties are summarized as follows:
| | | | | For the year ended December 31, | | | For the year ended December 31, |
| | | | 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| | | | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
The ultimate parent company | | | | | | | | | | | | | The ultimate parent company | |
PEWC | | Purchases | | | 2,745 | | | 521 | | | 18,170 | | PEWC | | Purchases | | 24,914 | | | 20,359 | | | 5,742 | |
| | Sales | | | — | | | 14 | | | 1,457 | | | Sales | | — | | | 5,254 | | | 90 | |
| | Fabrication income received | | | 140 | | | 412 | | | 208 | | | Fabrication income received | | — | | | 25 | | | — | |
| | Management fee paid | | | 199 | | | 136 | | | 143 | | | Construction income received | | 3 | | | — | | | — | |
| | Information technology service fee paid | | | 101 | | | 115 | | | 114 | | | Management fee received | | 10 | | | — | | | — | |
| | | Management fee paid | | 172 | | | 153 | | | 133 | |
| | | Information technology service fee paid | | 120 | | | 113 | | | 123 | |
| | | Training fee paid | | — | | | 110 | | | — | |
| | | Interest expenses paid | | — | | | 91 | | | 60 | |
| | | Rental fee paid | | 18 | | | — | | | — | |
| | | Materials purchased for interior office redecorating | | 8 | | | — | | | — | |
PEWC, Singapore Branch | | Management fee received | | | 14 | | | 14 | | | 14 | | PEWC, Singapore Branch | | Management fee received | | — | | | 14 | | | 14 | |
PEWC Singapore Co. (Pte) Ltd. | | Interest expenses paid | | | 22 | | | 21 | | | 15 | | PEWC Singapore Co. (Pte) Ltd. | | Interest expenses paid | | — | | | — | | | 12 | |
PEWC (HK) | | Purchases | | | — | | | 2,479 | | | 4,180 | | PEWC (HK) | | Sales | | 18,309 | | | 25,127 | | | 17,004 | |
| | Sales | | | 17,831 | | | 23,498 | | | 24,437 | | | Service fee paid | | 156 | | | 219 | | | 209 | |
| | Service fee paid | | | 218 | | | 231 | | | — | | |
| | | | | | | | | | | | | |
The immediate holding company | | | | | | | | | | | | | |
Moon View | | Income from discharge of liability* | | | — | | | 1,537 | | | — | | |
| | | | | | | | | | | | | |
Non-controlling shareholder of subsidiary | | | | | | | | | | | | | Non-controlling shareholder of subsidiary | |
Italian Thai and its affiliates | | Sales | | | 4,188 | | | 6,814 | | | 6,203 | | Italian Thai and its affiliates | | Sales | | 8,772 | | | 6,613 | | | 5,344 | |
| | Construction of factory building expenses | | | 215 | | | — | | | — | | | Construction of factory building expenses | | — | | | 1,651 | | | 3,436 | |
Fujikura Limited | | Purchases | | | 249 | | | 750 | | | 1,115 | | |
| | Others | | Others | | Fabrication cost | | 277 | | | 350 | | | 238 | |
Moon View discharged the Company’s liabilities towards Moon View due to the financial arrangement between related parties. The company wrote off the liabilities amounted to $1,537 from “due to related parties”, and recognized other income amounted to $1,537 for the year ended December 31, 2018.
24(c)Terms and condition of transactions with related parties
The sales to and purchases from related parties are based on negotiation by the entities. Outstanding balances at the year-end are unsecured and interest free. There have been no guarantees provided or received for any related party receivables or payables. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.
The
Our Company purchases from PEWC copper rods as raw materials, low to high voltage power cable, and wire for distribution purposes. The purchase price from PEWC is determined by reference to the quoted copper prices on the LME. No sales commission was received from PEWC during the years ended December 31,
2019, 20182022, 2021 and
2017. F-92
2020.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24.
| 24. RELATED PARTY TRANSACTIONS (continued) |
24(c)Terms and condition of transactions with related parties (continued)
Our Company leased office from PEWC. The lease terms and prices were both determined in accordance with mutual agreements. The rental fee were paid to PEWC monthly; the related expenses were both classified under manufacturing, selling, and administrative expenses.
Pursuant to the composite services agreement with PEWC:
| (i)
| PEWC will sell copper rod to the Company, upon the Company’s request, (1) at a price consisting of the average spot price of copper on the LME for the one month prior to purchase plus an agreed upon premium, (2) at prices and on terms at least as favorable as it provides copper rod to other purchasers of similar amounts of copper rod in the same markets as PEWC and (3) will give priority in the supply of copper rod to the Company over other purchasers of copper rod from PEWC.
|
| (ii)
| PEWC grants to the Company the right to distribute any wire or cable product manufactured by PEWC in all markets in which the Company presently distributes or develops the capability to distribute in the future, such products on such terms as have historically been in effect or on terms at least as favorable as PEWC grants to third parties that distribute such products in such markets. However, PEWC shall not be required to grant to the Company the right to distribute products manufactured by PEWC in the future in markets where the Company does not currently have the capability to distribute unless and until PEWC has no pre-existing contractual rights which would conflict with the grant of such right to the Company.
|
(i)PEWC will sell copper rod to our Company, upon our Company’s request, (1) at a price consisting of the average spot price of copper on the LME for the one month prior to purchase plus an agreed upon premium, (2) at prices and on terms at least as favorable as it provides copper rod to other purchasers of similar amounts of copper rod in the same markets as PEWC and (3) will give priority in the supply of copper rod to our Company over other purchasers of copper rod from PEWC. | (iii)
| PEWC will make available to the Company, upon the Company’s request and on terms to be mutually agreed between PEWC and the Company from time to time, access to certain of PEWC’s technology (and PEWC personnel necessary to use such technology) with respect to the design and manufacture of wire and cable products, including, without limitation, certain fiber optic technology. The Company benefits from research and development conducted by PEWC at little or no cost to the Company.
|
(ii)PEWC grants to our Company the right to distribute any wire or cable product manufactured by PEWC in all markets in which our Company presently distributes or develops the capability to distribute in the future, such products on such terms as have historically been in effect or on terms at least as favorable as PEWC grants to third parties that distribute such products in such markets. However, PEWC shall not be required to grant to our Company the right to distribute products manufactured by PEWC in the future in markets where our Company does not currently have the capability to distribute unless and until PEWC has no pre-existing contractual rights which would conflict with the grant of such right to our Company. | (iv)
| PEWC will make available to the Company, upon the Company’s request and on terms to be mutually agreed between PEWC and the Company from time to time, certain services with respect to the design and manufacture of wire and cable products, computerization, inventory control, purchasing, internal auditing, quality control, emergency back-up services, and recruitment and training of personnel; such services may include the training of the Company’s employees and managers at PEWC facilities and the secondment of PEWC employees and managers to the Company.
|
(iii)PEWC will make available to our Company, upon our Company’s request and on terms to be mutually agreed between PEWC and our Company from time to time, access to certain of PEWC’s technology (and PEWC personnel necessary to use such technology) with respect to the design and manufacture of wire and cable products, including, without limitation, certain fiber optic technology. Our Company benefits from research and development conducted by PEWC at little or no cost to our Company. | (v)
| Each of PEWC and the Company will offer the other party the right to participate in any negotiations with a third party concerning the establishment of any facility or similar venture to manufacture or distribute any wire or cable product outside of the markets where the Company currently manufactures or distributes, or intends to develop the capability to manufacture or distribute, any wire or cable product. Unless the Company and PEWC mutually agree otherwise, the Company shall have the right of first refusal to enter into any definitive agreement with such third party. If, however, such third party would not agree to the substitution of the Company for PEWC or such substitution would prevent the successful completion of the facility or venture, PEWC will arrange for the Company to participate to the extent possible.
|
(iv)PEWC will make available to our Company, upon our Company’s request and on terms to be mutually agreed between PEWC and our Company from time to time, certain services with respect to the design and manufacture of wire and cable products, computerization, inventory control, purchasing, internal auditing, quality control, emergency back-up services, and recruitment and training of personnel; such services may include the training of our Company’s employees and managers at PEWC facilities and the secondment of PEWC employees and managers to our Company.F-93
(v)Each of PEWC and our Company will offer the other party the right to participate in any negotiations with a third party concerning the establishment of any facility or similar venture to manufacture or distribute any wire or cable product outside of the markets where our Company currently manufactures or distributes, or intends to develop the capability to manufacture or distribute, any wire or cable product. Unless our Company and PEWC mutually agree otherwise, our Company shall have the right of first refusal to enter into any definitive agreement with such third party. If, however, such third party would not agree to the substitution of our Company for PEWC or such substitution would prevent the successful completion of the facility or venture, PEWC will arrange for our Company to participate to the extent possible.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24.
| 24. RELATED PARTY TRANSACTIONS (continued) |
24(d)Compensation of key management personnel of theour Company
| | | For the years ended December, 31 | | | For the years ended December, 31 |
| | 2019 | | 2018 | | 2017 | | | 2022 | | 2021 | | 2020 |
| | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 |
Short-term employee benefits | | | 3,073 | | 3,814 | | 3,900 | | Short-term employee benefits | 1,953 | | | 2,372 | | | 3,050 | |
Post-employment benefits | | | 179 | | 102 | | 103 | | Post-employment benefits | 48 | | | 84 | | | 114 | |
Termination benefits | | | — | | | 47 | | | 43 | | |
Total compensation paid to key management personnel | | | 3,252 | | | 3,963 | | | 4,046 | | Total compensation paid to key management personnel | 2,001 | | | 2,456 | | | 3,164 | |
The amounts disclosed in the table were recognized as expenses during the reporting periods.
| 25.
| COMMITMENTS AND CONTINGENCIES
|
25. COMMITMENTS AND CONTINGENCIES
25(a)
Non-cancellable operating lease commitments – the Company as lesseeThe Company leases a piece of land and some buildings in Singapore under non-cancellable operating lease arrangements for terms from 1 to 30 years. From January 1, 2019, the company has recognized right-of-use assets for these leases (see Note 16 and Note 27(c)).
| As of December 31,
| |
| 2018
| |
| US$’000
| |
Within one year
| | 616
| |
After one year but not more than five years
| | 1,279
| |
More than five years
| | 1,368
| |
| | 3,263
| |
25(b)Finance lease liabilities
Future minimum payments under finance leases with initial terms of one year or more consisted of the following for December 31, 2018. (see Note 16 and Note 27(c)).
| 2018 | |
| Minimum payments | | Present value of payments | |
| US$’000 | | US$’000 | |
Within one year | | 47 | | | 44 | |
After one year but not more than five years | | 47 | | | 46 | |
More than five years | | — | | | — | |
Total minimum lease payments | | 94 | | | 90 | |
Less: amount representing finance charges | | (4 | ) | | — | |
Present value of minimum lease payment | | 90 | | | 90 | |
The finance lease liabilities are secured by the leased motor vehicles. The average discount interest rate implicit in the lease is 5.18% for 2018.
F-94
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25.
| COMMITMENTS AND CONTINGENCIES (continued)
|
25(c)Purchase commitments
As of December 31,
20192022 and
2018, the2021, our Company
and its subsidiaries had commitments to purchase raw materials totaling
$200$191 million to
$290$225 million and
$136$219 million to
$176$262 million
(20,996(22,375 to
30,58026,255 metric tons and
22,45022,252 to
28,94026,652 metric tons), respectively, from third parties at the prices stipulated in the contracts.
25(d)
25(b) Capital commitments
As of December 31,
20192022 and
2018, the2021, our Company
and its subsidiaries had capital commitment relating to the construction of factory building improvement and acquisition of machinery, totaling
$5.8$0.7 million and
$0.6$0.9 million, respectively.
25(e)
As of December 31,
20192022 and
2018, one of Charoong Thai’s subsidiaries had guarantee obligations of bank credit line of its operating subsidiary at approximately $0 million and $2 million, respectively.As of December 31, 2019 and 2018, the Company2021, APWC provided a corporate guarantee not exceeding the sum of $24.7$25 million and $24.3$25 million, respectively, for the bond performance and banking facility of Sigma Cable.
As of December 31,
20192022 and
2018,2021, there were outstanding bank guarantees of
$38.5$14 million and
$36.9$14 million, respectively, issued by the banks on behalf of Charoong Thai and its subsidiaries in respect of certain performance bonds as required in the normal course of business of the companies. These guarantees generally expire within 1 year.
25(f)
25(d) Service commitments
As of December 31,
20192022 and
2018, the2021, our Company
and its subsidiaries had commitments in respect of management consulting services with related parties totaling
$0.3$0.1 million and
$0.2$0.1 million, respectively.
F-95
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
26.
| FAIR VALUE MEASUREMENT
|
Fair value information: | | | | | | | | | | | | |
As of December 31, 2019 | Fair value measurement using | |
| Total | | Quoted prices in active markets (Level 1) | | Significant observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | |
Financial assets (liabilities) - derivatives (Note 11.(a)) | | | | | | | | | | | | |
Foreign exchange forward contract | | (3 | ) | | — | | | (3 | ) | | — | |
Financial assets at fair value through other comprehensive income (Note 11.(a)) | | | | | | | | | | | | |
Unquoted equity instrument | | | | | | | | | | | | |
Thai Metal Processing Co., Ltd. | | 4,062 | | | — | | | — | | | 4,062 | |
Assets for which fair values are disclosed: | | | | | | | | | | | | |
Investment properties (Note 17) | | | | | | | | | | | | |
Land | | 11,566 | | | — | | | — | | | 11,566 | |
Office buildings | | 1,460 | | | — | | | — | | | 1,460 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair value information: |
| As of December 31, 2022 | Fair value measurement using |
| Total | | Quoted prices
in
active markets
(Level 1) | | Significant
observable
inputs
(Level 2) | | Significant
unobservable
inputs
(Level 3) |
| US$’000 | | US$’000 | | US$’000 | | US$’000 |
| Financial assets (liabilities) - derivatives (Note 11.(a)) | | | | | | | |
| Foreign exchange forward contract | (6) | | | | | (6) | | | |
| Financial assets at fair value through other comprehensive income (Note 11.(a)) | | | | | | | |
| Unquoted equity instrument | | | | | | | |
| Thai Metal Processing Co., Ltd. | 1,553 | | | — | | | — | | | 1,553 | |
| Assets for which fair values are disclosed: | | | | | | | |
| Investment properties (Note 17) | | | | | | | |
| Land | 10,322 | | | — | | | — | | | 10,322 | |
| Office buildings | 1,995 | | | — | | | — | | | 1,995 | |
| Warehouse | 5,291 | | | — | | | — | | | 5,291 | |
| Land leasehold right | 158 | | | — | | | — | | | 158 | |
| Other | 11 | | | — | | | — | | | 11 | |
There have been no transfers between Level 1 and Level 2 during the year.
| Fair value information: | | | | | | | | | | Fair value information: |
As of December 31, 2018 | Fair value measurement using | | |
| As of December 31, 2021 | | As of December 31, 2021 | Fair value measurement using |
| Total | | Quoted prices in active markets (Level 1) | | Significant observable inputs (Level 2) | | Significant unobservable inputs (Level 3) | | | Total | | Quoted prices
in
active markets
(Level 1) | | Significant
observable
inputs
(Level 2) | | Significant
unobservable
inputs
(Level 3) |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
Financial assets (liabilities) - derivatives (Note 11.(a)) | | | | | | | | | | |
Foreign exchange forward contract | | (142 | ) | | — | | (142 | ) | | — | | |
Financial assets at fair value through other comprehensive income (Note 11.(a)) | | | | | | | | | | Financial assets at fair value through other comprehensive income (Note 11.(a)) | |
Unquoted equity instrument | | | | | | | | | | Unquoted equity instrument | |
Thai Metal Processing Co., Ltd. | | 2,332 | | — | | — | | 2,332 | | Thai Metal Processing Co., Ltd. | 2,929 | | | — | | | — | | | 2,929 | |
Assets for which fair values are disclosed: | | | | | | | | | | Assets for which fair values are disclosed: | |
Investment properties (Note 17) | | | | | | | | | | Investment properties (Note 17) | |
Land | | 10,656 | | — | | — | | 10,656 | | Land | 10,528 | | | — | | | — | | | 10,528 | |
Office buildings | | 1,397 | | — | | — | | 1,397 | | Office buildings | 2,444 | | | — | | | — | | | 2,444 | |
| Warehouse | | Warehouse | 5,658 | | | — | | | — | | | 5,658 | |
| Land leasehold right | | Land leasehold right | 173 | | | — | | | — | | | 173 | |
There have been no transfers between Level 1 and Level 2 during the year.F-96
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
| FINANCIAL RISK MANAGEMENT27. FINANCIAL RISK MANAGEMENT OBJECTIVES
|
Financial risks are those derived from financial instruments
theour Company is exposed to during or at the closing of each fiscal year. The objective of
theour Company’s financial risk management is to minimize its risk exposure against various financial risks, which include market risk, credit risk and liquidity risk.
TheOur Company uses derivative instruments to cover certain risks when it considers them necessary. It is
theour Company’s policy that no trading in derivatives for speculative purposes shall be undertaken.
The
Our Company manages its exposure to key financial risks, as described in the succeeding paragraphs.
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, equity price risk, foreign currency risk and commodity price risk. Financial instruments affected by market risk include loans and borrowings, financial instruments at fair value through profit or loss, and financial instruments at fair value through other comprehensive income.
The sensitivity analysis in the following sections relate to the position as of December 31,
20192022 and
2018.2021.
The analysis excludes the impact of movements in market variables on the carrying value of other post-retirement obligations provisions and on the non-financial assets and liabilities of foreign operations.
The
Our Company’s exposure to interest rate risk arises from borrowing at floating interest rates. Changes in interest rate will affect future cash flows but not the fair value. Less than
25%36% of
theour Company’s financial liabilities bear floating interest rate, and the rest of its financial liabilities bear fixed interest rate which are close to the market rate or are non-interest bearing.
At the reporting dates, a change of 30 basis points of interest rate in a reporting period could cause the profit for the years ended December 31, 20192022 and 20182021 to increase/decrease by $46$128 and $64,$168, respectively.
The
Our Company’s exposure to equity price risk arises from unquoted instrument held by
theour Company and classified in the balance sheet as non-current financial assets at fair value through other comprehensive income.
The fair value and the sensitivity analysis of the held equity instrument are disclosed in Note 11(d).
F-97
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
| FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
|
(iii)Foreign currency risk27(a)Market risk (continued)
| (iii)
| Foreign currency risk
| |
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. TheOur Company’s exposure to the risk of changes in foreign exchange rates arise from sales, purchases and borrowings by operating units in currencies other than the unit’s functional currency. TheOur Company’s principal operations are located in Thailand, the PRC, Singapore and Australia and a substantial portion of its revenues are denominated in Thai Baht, RMB, Australian dollars or Singapore dollars, whereas a substantial portion of theour Company’s cost of sales are denominated in USU.S. dollars, its reporting currency. Any devaluation of the functional currencies of theour Company’s principal subsidiaries against the USU.S. dollar would likely have an adverse impact on the operations of theour Company. The Company currently does not maintain a foreign currency hedging policy. However, managementManagement monitors the foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.
(refer to NTA-11(c)(ii))
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
The balance of financial assets and liabilities denominated in a currency different from theour Company’s each functional currency are summarized below.
| | Financial Assets | | Financial Liabilities | | | Financial Assets | | Financial Liabilities |
| As of December 31, | | As of December 31 | | | As of December 31, | | As of December 31 |
| 2019 | | 2018 | | 2019 | | 2018 | | | 2022 | | 2021 | | 2022 | | 2021 |
United States dollar (USD) | | 19,263 | | | 21,529 | | | 4,802 | | | 25,733 | | United States dollar (USD) | 8,231 | | | 15,304 | | | 15,057 | | | 58,526 | |
Thai Baht (THB) | | 346 | | 349 | | 87,779 | | 30 | | Thai Baht (THB) | 326 | | | 326 | | | 30 | | | 30 | |
Singapore dollar (SGD) | | 233 | | 170 | | 20 | | 62 | | Singapore dollar (SGD) | 106 | | | 130 | | | 46 | | | 6 | |
Taiwan dollar (TWD) | | 9,711 | | 5,227 | | 7,648 | | 4,872 | | Taiwan dollar (TWD) | 25,282 | | | 9,929 | | | 4,463 | | | 5,104 | |
Renminbi (RMB) | | 119 | | 19 | | — | | 179 | | Renminbi (RMB) | 18 | | | 18 | | | — | | | — | |
Hong Kong dollar (HKD) | | 7,526 | | 20,005 | | 83 | | 43 | | Hong Kong dollar (HKD) | 7,773 | | | 10,678 | | | 25 | | | 28 | |
Australian dollar (AUD) | | — | | 66 | | — | | — | | |
Euro (EUR) | | — | | — | | — | | 199 | | Euro (EUR) | 20 | | | 125 | | | — | | | 519 | |
Japanese yen (JPY) | | — | | — | | — | | 14,768 | | |
Foreign currency sensitivity
The following table demonstrates the sensitivity of
theour Company’s profit before tax and equity to a reasonably possible change of each foreign currency exchange rates against all other non-functional currencies, with all other variables held constant.
| Change rate | | USD | | THB | | SGD | | TWD | | RMB | | HKD | | AUD | | JPY | | EUR | |
| 5% | | | 723 | | | (147 | ) | | 8 | | | 3 | | | 1 | | | 48 | | | — | | | — | | | — | |
2019 | -5% | | | (723 | ) | | 147 | | | (8 | ) | | (3 | ) | | (1 | ) | | (48 | ) | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 5% | | | (210 | ) | | — | | | 4 | | | 1 | | | (1 | ) | | 127 | | | 2 | | | (7 | ) | | (11 | ) |
2018 | -5% | | | 210 | | | — | | | (4 | ) | | (1 | ) | | 1 | | | (127 | ) | | (2 | ) | | 7 | | | 11 | |
F-98
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
| FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Change
rate | | USD | | THB | | SGD | | TWD | | HKD | | EUR |
| | | | | | | | | | | | | |
| 2022 | 5% | | (341) | | | — | | | 2 | | | 34 | | | 50 | | | 1 | |
| -5% | | 341 | | | — | | | (2) | | | (34) | | | (50) | | | (1) | |
| 5% | | (2,161) | | | — | | | 5 | | | 9 | | | 68 | | | (22) | |
| 2021 | -5% | | 2,161 | | | — | | | (5) | | | (9) | | | (68) | | | 22 | |
The
(iv)Commodity price risk
Our Company is affected by the volatility of certain commodities. Copper is the principal raw material used by
theour Company.
TheOur Company purchases copper at price closely related to the prevailing international spot market on the London Metal Exchange for copper. The price of copper is influenced heavily by global supply and demand as well as speculative trading. Consequently, a change in the price of copper will have a direct effect on
theour Company’s cost of sales.
TheOur Company does not use derivative instruments to hedge the price risk associated with the purchase of this commodity. However, we cover some of these risks through long-term purchase contracts.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
Commodity price sensitivity
The following table shows the potential effect of price changes in copper.
| Change in year-end price | | Effect on profit before tax | | Effect on equity | | | | | | | | | | | | | | | |
| US$’000 | | US$’000 | | US$’000 | | Change in
year-end
price | | Effect on profit
before tax | | Effect on equity |
2019 | | +16 | % | | (3,473 | ) | N/A | |
| | | US$’000 | | US$’000 | | US$’000 |
| 2022 | | 2022 | |
Copper | | -16 | % | | 3,473 | | N/A | Copper | +23 | % | | 5,981 | | | N/A |
| | | | | | | | -23 | % | | (5,981) | | | N/A |
2018 | | +23 | % | | 6,461 | | N/A | |
| 2021 | | 2021 | +95 | % | | 26,926 | | | N/A |
Copper | | -23 | % | | (6,461 | ) | N/A | Copper | -95 | % | | (26,926) | | | N/A |
On average, copper composes around
82%79% and
85%75% of the product cost in
2019December 31, 2022 and
2018,2021, respectively. The above sensitivity analysis is based on the most significant fluctuation rate of the month in
2019December 31, 2022 as compared to the same month in
20182021 and the most significant fluctuation rate of the month in
20182021 as compared to the same month in
20172020 and one month manufacturing lead time to estimate its impact on profit before tax in
2019December 31, 2022 and
2018,2021, respectively.
Credit risk arises from cash and cash equivalents, bank deposits, foreign currency forward contracts, trade receivables, contract assets, other receivables excluding bank deposits, and amounts due from related parties. TheOur Company’s exposure to credit risk arises from default of counterparty, with maximum exposure equal to the carrying amount of these financial instruments.
The
Our Company maintains cash and cash equivalents, as well as bank deposits with various financial institutions located in Singapore, Thailand, Australia, Hong Kong and the People’s Republic of China.
TheOur Company’s policy is designed to limit its exposure to any one institution.
TheOur Company performs periodic evaluations of the relative credit standing of those financial institutions that are considered in
theour Company’s investment strategy.
Foreign currency forward contracts are only used for economic hedging purposes and not as speculative investments. The counterparties on these forward contracts are banks with international operations and good credit quality.
F-99
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
| FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
|
27(b)Credit risk (continued)
Concentrations of credit risk with respect to trade receivables and contract assets are limited due to the large number of entities comprising theour Company’s customer base. TheOur Company analysis the credit risk for each of the new clients before credit limits are offered. Internal risk control assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. TheOur Company carefully assesses the financial strength of its customers and generally does not require any collateral. Compliances with credit limits are monitored, and exceptions beyond a certain threshold are discussed regularly. Customers’ credit terms are extend over time only when they establish good payment patterns with theour Company. Other receivables excluding bank deposits mainly
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
(i)Risk management (continued)
contain doubtful receivables from customers.
TheOur Company obtained collateral in respect of those material receivables, and performed the valuation of the collateral.
The
Our Company enters into transactions with related parties in the ordinary course of its business. Refer to Note 24(c) for theour Company’s general credit risk management practices.
| (ii)
| Definition of default
|
(ii)Definition of defaultThe
Our Company considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates that financial assets that meet either of the following criteria are generally not recoverable:
| ►
| when there is a breach of financial covenants by the debtor; or
|
| ►
| information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Company, in full (without taking into account any collateral held by the Company).
|
uwhen there is a breach of financial covenants by the debtor; or | (iii)
| Measurement and recognition of expected credit losses
|
uinformation developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including our Company, in full (without taking into account any collateral held by our Company).The
(iii)Measurement and recognition of expected credit losses
Our Company recognizes a loss allowance for expected credit losses on trade receivables and contract assets by using a provision matrix. Refer to Note 12(c) for the approach used to measure expected credit losses of trade receivables, Note 12(b) for the loss allowance recognized, and Note 12(a) for changes in the loss allowance on trade receivables. While contract assets are also subject to the impairment requirements of IFRS 9, the identified impairment loss was immaterial.
The
Our Company applies the general approach for all other financial assets that are subject to the expected credit loss model. The expected credit losses of the respective financial instruments for the years ended December 31, 20192022 and 20182021 were immaterial. While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, the identified impairment loss was also immaterial.
Financial instruments are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with theour Company, and a failure to make contractual payments for a period of greater than generally 90 days past due.
| (v)
| Concentrations of credit risk
|
(v)Concentrations of credit riskAs of December 31,
20192022 and
2018,2021, trade receivables from one customer represented
9.31%14.44% and
8.2%15.53% of total trade receivables of
theour Company, respectively. The credit concentration risk of other trade receivables is insignificant.
F-100
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
| FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
|
27(c)Liquidity risk
Liquidity risk arises from the financial liabilities of
theour Company
and its subsidiaries and their subsequent ability to meet obligations to repay their financial liabilities as and when they fall due. Management manages
theour Company’s liquidity risk by closely monitoring cash flow from the operations.
TheOur Company has about $54 million in cash and cash equivalents,
$208$158 million in unutilized amounts of bank loans, and the total financial liabilities is
$35$120 million at the reporting date, which for financial assets and liabilities results in a net asset position. Liquidity risk is considered
lownot high as of December 31,
2019.2022. Refer to Note 29 for development subsequent to year end.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27. FINANCIAL RISK MANAGEMENT OBJECTIVES (continued)
27(c) Liquidity risk (continued)
The table below summarizes the maturity profile of theour Company’s financial liabilities based on contractual undiscounted payment obligations.
| < 1 year | | 2 to 3 years | | 4 to 5 years | | > 5 years | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | |
| US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | | < 1 year | | 2 to 3 years | | 4 to 5 years | | > 5 years | | Total |
As of December 31, 2019 | | | | | | | | | | | | |
| | | US$’000 | | US$’000 | | US$’000 | | US$’000 | | US$’000 |
| As of December 31, 2022 | | As of December 31, 2022 | |
Financial liabilities | | | | | | | | | | | | Financial liabilities | |
Interest-bearing loans and borrowings | | 11,484 | | — | | — | | — | | 11,484 | | Interest-bearing loans and borrowings | 46,087 | | | 9,616 | | | 400 | | | 4,870 | | | 60,973 | |
Trade and other payables | | 16,879 | | — | | — | | — | | 16,879 | | Trade and other payables | 39,891 | | | — | | | — | | | — | | | 39,891 | |
Due to related parties | | 3,284 | | — | | — | | — | | 3,284 | | Due to related parties | 16,613 | | | — | | | — | | | — | | | 16,613 | |
Financial liabilities at fair value through profit or loss | | 3 | | — | | — | | — | | 3 | | Financial liabilities at fair value through profit or loss | 6 | | | — | | | — | | | — | | | 6 | |
Lease liability | | 656 | | | 910 | | | 444 | | | 1,182 | | | 3,192 | | Lease liability | 788 | | | 1,073 | | | 469 | | | 579 | | | 2,909 | |
| | 32,306 | | | 910 | | | 444 | | | 1,182 | | | 34,842 | | | 103,385 | | | 10,689 | | | 869 | | | 5,449 | | | 120,392 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2018 | | | | | | | | | | | | |
| As of December 31, 2021 | | As of December 31, 2021 | |
Financial liabilities | | | | | | | | | | | | Financial liabilities | |
Interest-bearing loans and borrowings | | 25,151 | | — | | — | | — | | 25,151 | | Interest-bearing loans and borrowings | 62,295 | | | 428 | | | 428 | | | 3,626 | | | 66,777 | |
Trade and other payables | | 21,127 | | — | | — | | — | | 21,127 | | Trade and other payables | 44,784 | | | — | | | — | | | — | | | 44,784 | |
Due to related parties | | 2,997 | | — | | — | | — | | 2,997 | | Due to related parties | 11,865 | | | — | | | — | | | — | | | 11,865 | |
Financial liabilities at fair value through profit or loss | | 142 | | — | | — | | — | | 142 | | |
Finance lease liability | | 47 | | | 36 | | | 11 | | | — | | | 94 | | |
| Lease liability | | Lease liability | 637 | | | 925 | | | 412 | | | 764 | | | 2,738 | |
| | 49,464 | | | 36 | | | 11 | | | — | | | 49,511 | | | 119,581 | | | 1,353 | | | 840 | | | 4,390 | | | 126,164 | |
The primary objectives of
theour Company’s capital management are to safeguard
theour Company’s ability to continue as a going concern and maintain healthy capital ratios in order to support its business, maximize shareholders’ value and to maintain an optimal capital structure to reduce the cost of capital.
The
Our Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions and the risks characteristics of the underlying assets. To maintain or adjust the capital structure,
theour Company may adjust the dividend payment to shareholders, return capital to shareholders, issue new shares or conduct stock repurchase programs.
TheOur Company is not subject to any externally imposed capital requirements. No changes were made in the objectives, policies or processes for managing capital during the years ended December 31,
20192022 and
2018.F-101
2021.
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27.
| 27. FINANCIAL RISK MANAGEMENT OBJECTIVES (continued) |
27(d)Capital management (continued)
In line with industry practices, theour Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. TheOur Company includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents.
| | As of December 31, | | | As of December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Interest bearing loans and borrowings | | 11,356 | | 24,814 | | Interest bearing loans and borrowings | 57,731 | | | 65,387 | |
Trade and other payables | | 16,879 | | 21,127 | | Trade and other payables | 39,891 | | | 44,784 | |
Less: cash and cash equivalents | | (53,673 | ) | | (60,778 | ) | Less: cash and cash equivalents | (54,017) | | | (44,507) | |
Net debt | | (25,438 | ) | | (14,837 | ) | Net debt | 43,605 | | | 65,664 | |
Total Equity | | 228,435 | | | 221,816 | | Total Equity | 211,428 | | | 209,317 | |
Capital and net debt | | 202,997 | | | 206,979 | | Capital and net debt | 255,033 | | | 274,981 | |
Gearing ratio | 0.0% | | 0.0% | | Gearing ratio | 17.1% | | 23.9% |
The
Our Company has no direct business operations other than its ownership of the capital stock of its subsidiaries and equity investees holdings. As a holding company,
theour Company’s ability to pay dividends, as well as to meet its other obligations, depends upon the amount of distributions, if any, received from
theour Company’s operating subsidiaries and other holdings and investments.
TheOur Company’s operating subsidiaries and other holdings and investments, from time to time, may be subject to restrictions on their ability to make distributions to
theour Company, including as a result of restrictive covenants contained in loan agreements, restrictions on the conversion of local currency earnings into U.S. dollars or other hard currency and other regulatory restrictions. For example, PRC legal restrictions permit payments of dividends by our business entities in PRC only out of their retained earnings, if any, determined in accordance with relevant PRC accounting standards and regulations. Under PRC law, such entities are also required to set aside a portion of their net income each year to fund certain reserve funds. These reserves are not distributable as cash dividends. The foregoing restrictions may also affect
theour Company’s ability to fund operations of one subsidiary with dividends and other payments received from another subsidiary.
The credit lines of
theour Company were collateralized by:
| (i)
| Mortgage of the Company’s land, buildings, machinery and equipment, investment properties and land use rights with a total carrying amount of $15,099 at December 31, 2019 (2018: $9,084);
|
| (ii)
| Pledge of other receivables of $4,847 at December 31, 2019 (2018: $7,525) ;
|
(i)Mortgage of our Company’s land, buildings, machinery and equipment, investment properties and land use rights with a total carrying amount of $10,541 at December 31, 2022 (2021: $7,030); | (iii)
| Corporate guarantee issued by the Company and a subsidiary of the Company.
|
(ii)Pledge of other receivables of $1,118 at December 31, 2022 (2021: $1,109) ; | (iv)
| A trading facility was secured by all the assets and uncalled capital with total carrying amount of $27,454 of a subsidiary as of December 31, 2019 (2018: $ 27,731).
|
(iii)Corporate guarantee issued by APWC.(iv)A trading facility was secured by all the assets with total carrying amount of $35,080 of a subsidiary as of December 31, 2022 (2021: $33,940).
The weighted average interest rates on bank loans and overdrafts as of December 31,
20192022 and
20182021 were
3.72%2.58% and
3.68%2.15% per annum, respectively.
F-102
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28.
| 28. CASH FLOW INFORMATION |
28(a)28(a) Investing activities with partial cash payments
| For the year end December 31, | | | | | | | | | | | |
| (i)Purchase of PPE | | (i)Purchase of PPE | For the year end December 31, |
| 2019 | | 2018 | | | 2022 | | 2021 |
| US$’000 | | US$’000 | | | US$’000 | | US$’000 |
Acquisition of property, plant and equipment | | 3,406 | | 4,498 | | Acquisition of property, plant and equipment | 3,553 | | | 8,657 | |
Add: Payable for PPE or CIP - Opening | | 213 | | 311 | | Add: Payable for PPE or CIP - Opening | 173 | | | 196 | |
Less: Payable for PPE or CIP - Ending | | (355 | ) | | (213 | ) | Less: Payable for PPE or CIP - Ending | (152) | | | (173) | |
Less: Prepayment for PPE & CIP - Opening | | (210 | ) | | (304 | ) | Less: Prepayment for PPE & CIP - Opening | (427) | | | (561) | |
Add: Prepayment for PPE & CIP - Ending | | 2,388 | | 210 | | Add: Prepayment for PPE & CIP - Ending | 599 | | | 428 | |
Less: acquisition by means of a lease | | — | | | (61 | ) | |
Cash paid during the year | | 5,442 | | | 4,441 | | Cash paid during the year | 3,746 | | | 8,547 | |
| | | | | | | |
28(b)28(b) Reconciliation of liabilities arising from financing activities
| Interest -bearing loans and borrowings | | Financial lease liabilities | | Total | | | | | | | | | | | | | | | | |
| US$’000 | | US$’000 | | US$’000 | | | Interest -bearing loans and borrowings | | Lease liabilities | | Total |
Balance at January 1, 2017 | | 41,151 | | 78 | | 41,229 | | |
| | | US$’000 | | US$’000 | | US$’000 |
| Balance at January 1, 2021 | | Balance at January 1, 2021 | 13,781 | | | 2,334 | | | 16,115 | |
Changes in cash flows | | -16,220 | | (46 | ) | | (16,266 | ) | Changes in cash flows | 54,161 | | | (632) | | | 53,529 | |
Foreign exchange adjustments | | (117 | ) | | (8 | ) | | (125 | ) | Foreign exchange adjustments | (2,555) | | | (76) | | | (2,631) | |
Acquisition of PP&E by means of a lease | | — | | 61 | | 61 | | |
| Acquisition lease | | Acquisition lease | — | | | 906 | | | 906 | |
Other changes | | — | | | 5 | | | 5 | | Other changes | — | | | 2 | | | 2 | |
Balance at December 31, 2018 | | 24,814 | | | 90 | | | 24,904 | | |
Recognized on adoption of IFRS 16 | | — | | | 2,651 | | | 2,651 | | |
| Remeasurement | | Remeasurement | — | | | (47) | | | (47) | |
| Balance at December 31, 2021 | | Balance at December 31, 2021 | 65,387 | | | 2,487 | | | 67,874 | |
Changes in cash flows | | (14,462 | ) | | (426 | ) | | (14,888 | ) | Changes in cash flows | (5,176) | | | (616) | | | (5,792) | |
Foreign exchange adjustments | | 1,004 | | 29 | | 1,033 | | Foreign exchange adjustments | (2,480) | | | (44) | | | (2,524) | |
Acquisition leases | | — | | 476 | | 476 | | |
| Acquisition lease | | Acquisition lease | — | | | 851 | | | 851 | |
Other changes | | — | | | 8 | | | 8 | | Other changes | — | | | (15) | | | (15) | |
Balance at December 31, 2019 | | 11,356 | | | 2,828 | | | 14,184 | | |
| Remeasurement | | Remeasurement | — | | | (89) | | | (89) | |
| Balance at December 31, 2022 | | Balance at December 31, 2022 | 57,731 | | | 2,574 | | | 60,305 | |
F-103
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29. SUBSEQUENT EVENT
29(a) CTW dividend payments
On
March 20, 2020,February 21, 2023, the Board of Directors of Charoong Thai declared a cash dividend distribution to its shareholders amounted to
$2.9$0.6 million (Baht
79.619.9 million, equivalent to Baht
0.20.05 per share),
$ 1.4$0.3 million of which will be distributed to non-controlling interest. The dividend will be paid on May
15, 2020.22, 2023. This dividend distribution plan requires the approval of the
20192023 Annual General Meeting of Shareholders of Charoong Thai.
29(b) COVID-19 Could Have a Material Adverse Effect on Our Business, Financial Condition and Results of Operations
The recent outbreak in China of the Coronavirus Disease 2019 (“COVID-19”), which has been declared by the World Health Organization to be a “public health emergency of international concern,” has spread across the globe and is impacting worldwide economic activity and financial markets. Our manufacturing and production have been affected by the outbreak of COVID-19. COVID-19 has disrupted our operations and the operations of our suppliers, customers, and other business partners and may continue to do so for an indefinite period of time, including as a result of travel restrictions and/or business shutdowns. A slowdown in economic activity as a result of COVID-19 can be expected to result in a reduction in demand for our products. The outbreak of COVID-19 has also resulted in a decline in the price of copper, which has had the effect of reducing the market value of our inventory of copper.
Due to the measures instituted in China in response to COVID-19, our China production facilities have been operating below normal production levels and our production levels have not yet fully recovered to normal levels. We do not know when our production levels will recover to normal levels.
In addition, the Singapore Government has ordered most business to close from April 7, 2020 until June 1, 2020. We have been permitted to continue to operate during this period with reduced on site staff. Since April 7, 2020, approximately half of the employees of our Singapore operations have been working from home while the remaining employees have continued to work on site. We do not know if the Singapore Government will extend (or otherwise alter the terms of) its order requiring most business to close or whether our employees who continue to work on site will continue to be permitted to do so.
This is a rapidly evolving situation and the impact of COVID-19 on the global economy and our business is uncertain at this time. While it is not possible at this time to estimate the impact that COVID-19 could have on worldwide economic activity and our business, the continued spread of COVID-19 and the measures taken by governments, businesses and other organizations in response to COVID-19 are expected to reduce our revenues and could have a material adverse impact our business, financial condition and results of operations.
F-104
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
29(c) Continued Listing Standards Letter from Nasdaq
On November 21, 2019, the Company received written notification (the "Market Value Notification Letter") from The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that it was not in compliance with the $5 million minimum market value of publicly held shares requirement set forth in the Nasdaq rules for listing on the Nasdaq Global Market tier. In accordance with the Nasdaq Listing Rules, the Company was provided 180 calendar days, or until May 19, 2020 (the "Compliance Period"), to regain compliance. On April 16, 2020, Nasdaq announced that, as of April 16, 2020, Nasdaq was tolling the compliance periods for bid price and market value of publicly held shares (“MVPHS”) requirements (collectively, the “Price-based Requirements”) for all listed companies through June 30, 2020. As a result, companies presently in compliance periods for any Price-based Requirements will remain at that same stage of the process through June 30, 2020 and, commencing on July 1, 2020, companies will receive the balance of any pending compliance period in effect at the start of the tolling period to regain compliance. Accordingly, since the Company had 33 calendar days remaining in its MVPHS compliance period as of April 16, 2020, it will, upon reinstatement of the Price-based Requirements, still have 33 calendar days from July 1, 2020, or until August 3, 2020, to regain compliance. Nasdaq has informed us that the Company can regain compliance, either during the suspension or during the compliance period resuming after the suspension, by evidencing compliance with the Price-based Requirements for a minimum of 10 consecutive trading days. For the Company to regain compliance, the market value of our publicly held shares has to equal or exceed $5 million for a minimum of 10 consecutive business days. On April 22, 2020, the minimum market value of our publicly held Common Shares was $3,592,234. If the Company does not regain compliance by August 3, 2020, Nasdaq has informed us that Nasdaq will delist the Company's common shares from Nasdaq unless the Company requests a hearing before the Nasdaq Hearings Panel or unless the Company transfers its listing of the Common Shares to the Capital Market tier, which transfer would require that the Company then meet the criteria for transfer to the Capital Market tier. The Company will closely watch the stock price trend to see whether to take actions to meet MVPHS requirements.
Other than the above events, theour Company is not aware of any matter or circumstance that has significantly affected or may significantly affect the operations of theour Company, the results of those operations, or the state of affairs of theour Company.
30.
| APPROVAL OF THE FINANCIAL STATEMENTS
|
ASIA PACIFIC WIRE & CABLE CORPORATION LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved and authorized for issuance by the board of directors on April
24, 2020.F-105
25, 2023.
